UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2009

                                       OR

    [ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

           For the transition period from ___________ to _____________

                          Commission File No. 814-00063

                     CHINA BIOPHARMACEUTICALS HOLDINGS, INC.
--------------------------------------------------------------------------------
             (Exact Name of registrant as specified in its charter)

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

                          No. 859, Pan Xu Road, Suzhou,
                         Jiangsu Province, China 215000
--------------------------------------------------------------------------------
               (Address of principal executive offices)(Zip Code)

                               (86) 512 6855 0568
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

              (Former name, former address and former fiscal year,
                          of changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the 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 has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to  be  submitted   and  posted   pursuant  to  Rule  405  of   Regulation   S-T
(Section.232.405  of this  chapter)  during the preceding 12 months (or for such
shorter  period that the registrant was required to submit and post such files).
Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
the definitions of "large accelerated  filer,"  "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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

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
stock as of the latest practicable date: 36,590,312 shares of Common Stock, par
value $0.01 per share, as of May 11, 2009.

<PAGE>

                                TABLE OF CONTENTS

  ITEM NO.  DESCRIPTION                                                 PAGE NO.

  PART I -  FINANCIAL INFORMATION

  ITEM 1.   FINANCIAL STATEMENTS.                                             1

  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS.                          24

  ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
               RISK.                                                         31

  ITEM 4T.  CONTROLS AND PROCEDURES.                                         31

  PART II - OTHER INFORMATION

  ITEM 6.   EXHIBITS.                                                        31

  SIGNATURES                                                                 32

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2009 AND DECEMBER 31, 2008

ITEM 1. FINANCIAL STATEMENTS  INSERT FINANCIALS HERE

<TABLE>
<CAPTION>
                                                                               March 31,      December 31,
                                                                                 2009            2008
                                                                            --------------   -------------
                                                                             (Unaudited)
<S>                                                                         <C>              <C>
                                     ASSETS
CURRENT ASSETS:
   Cash                                                                     $    2,226,777   $     581,727
   Short term investment                                                            42,360       4,432,657
   Restricted cash                                                               1,433,950       1,373,228
   Accounts receivable, net of allowance for doubtful accounts of                2,916,364       3,371,225
     $1,280,099 and $1,200,983 at March 31, 2009 and December 31, 2008,
     respectively
   Other receivables and prepayments, net of allowance for doubtful                195,230         505,987
     accounts of $299,965 and $300,068 at March 31, 2009 and December 31,
     2008, respectively
   Other receivables - related parties                                             349,921         349,960
   Advances to suppliers                                                           290,561          45,877
   Inventories, net of $26,214 and $26,250 allowance at March 31, 2009and       12,614,701       9,033,655
     December 31, 2008, respectively.
   Loan receivable                                                               1,860,550               -
                                                                            --------------   -------------
     Total current assets                                                       21,930,414      19,694,316
                                                                            --------------   -------------

PLANT AND EQUIPMENT, NET                                                        12,616,528      11,655,180
                                                                            --------------   -------------

OTHER ASSETS:
   Intangible asset, net                                                         7,539,511       7,587,057
   Long term prepayments                                                           127,455          80,541
   Advance on patent and right purchase                                          1,319,759       1,321,561
   Other assets                                                                     37,345          40,678
                                                                            --------------   -------------
     Total other assets                                                          9,024,070       9,029,837

                                                                            --------------   -------------
       Total assets                                                         $   43,571,012   $  40,379,333
                                                                            ==============   =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Notes payable                                                            $    4,189,900   $   4,563,837
   Accounts payable and accrued                                                  7,924,647       4,988,219
     liabilities
   Other payables                                                                  855,399       1,129,031
   Other payables - related parties                                                716,554         666,694
   Customer deposits                                                             1,519,475       1,288,179
   Taxes payable                                                                 1,823,943       2,215,667
   Dividend payables                                                             1,110,346       1,110,346
   Short-term loans                                                              1,435,700       2,611,260
                                                                            --------------   -------------
     Total current liabilities                                                  19,575,964      18,573,233

LONG TERM LIABILITIES:
   Warrants liabilities                                                          1,171,769               -
                                                                            --------------   -------------
COMMITMENTS AND CONTINGENCIES

REDEEMABLE PREFERRED STOCK - Series B, $0.01 par value, 6,185,607 shares
   issued and outstanding at March 31, 2009 and December 31, 2008.              12,508,534      12,508,534
                                                                            --------------   -------------

EQUITY

   Preferred stock - $0.01 par value, 10,000,000 shares authorized;
     Series A, 50,000 shares issued and outstanding at March 31, 2009 and
       December 31, 2008;                                                              500             500
     Series B, 6,185,607 shares issued and outstanding at March 31, 2009
       and December 31, 2008, classified above outside permanent
       shareholders' equity.
   Common stock, $0.01 par value, 200,000,000 shares authorized;
       36,590,312 shares issued and outstanding at March 31, 2009 and
       December 31, 2008, respectively.                                            365,903         365,903
   Paid-in capital                                                               3,741,916      13,222,851
   Capital receivable                                                             (252,471)       (252,471)
   Statutory reserves                                                            1,508,798       1,508,798
   Accumulated deficit                                                          (7,396,816)    (16,797,813)
   Accumulated comprehensive income                                                889,837         904,970
                                                                            --------------   -------------
     Total shareholders' deficit                                                (1,142,333)     (1,047,262)

Non-controlling interest                                                        11,457,078      10,344,828
                                                                            --------------   -------------
       Total equity                                                             10,314,745       9,297,566
                                                                            --------------   -------------

   Total liabilities and shareholders' equity                               $   43,571,012   $  40,379,333
                                                                            ==============   =============
</TABLE>

The  accompanying  notes are an integral  part of these  unaudited  consolidated
financial statements.

                                       -1-

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                            For the three month ended March 31,
                                                                                   2009               2008
                                                                            -----------------   ---------------
<S>                                                                         <C>                 <C>
REVENUE                                                                     $      12,648,007   $    10,973,241

COST OF REVENUE                                                                     8,601,218         7,711,162
                                                                            -----------------   ---------------

GROSS PROFIT                                                                        4,046,789         3,262,079
                                                                            -----------------   ---------------
OPERATING EXPENSES:
   Research and development                                                            13,933            17,947
   Selling, general and administrative                                              1,413,537         1,074,797
                                                                            -----------------   ---------------
     Total operating expenses                                                       1,427,470         1,092,744
                                                                            -----------------   ---------------

INCOME FROM OPERATIONS                                                              2,619,319         2,169,335
                                                                            -----------------   ---------------
OTHER INCOME (EXPENSE):
   Interest income (expense), net                                                       2,290           (44,727)
   Gain on trading securities                                                          10,646                 -
   Changes in fair value of warrants                                                 (116,316)                -
   Other expenses, net                                                                (64,793)                -
                                                                            -----------------   ---------------
     Total other income (expense), net                                               (168,173)          (44,727)
                                                                            -----------------   ---------------

INCOME BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST                             2,451,146         2,124,608

PROVISION FOR INCOME TAXES                                                            349,060           299,409
                                                                            -----------------   ---------------

NET INCOME BEFORE NON-CONTROLLING INTEREST                                          2,102,086         1,825,199
   Less - Net income attributable to the noncontrolling interest                    1,126,571         1,021,266
                                                                            -----------------   ---------------
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST                                       975,515           803,933

   Dividends and accretion on redeemable preferred stock                                    -           311,857
                                                                            -----------------   ---------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS                                           975,515           492,076

OTHER COMPREHENSIVE INCOME:
   Foreign currency translation adjustment                                            (15,134)          347,173
   Comprehensive income (loss) attributable to the noncontrolling interest            (14,321)          334,964
                                                                            -----------------   ---------------
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST                   $         946,060   $     1,174,213
                                                                            =================   ===============

EARNINGS PER SHARE:
     Basic                                                                  $            0.03   $          0.01
                                                                            =================   ===============
     Diluted                                                                $            0.02   $          0.01
                                                                            =================   ===============
WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING:
     Basic                                                                         36,590,312        36,490,312
                                                                            =================   ===============
     Diluted                                                                       49,011,526        48,911,526
                                                                            =================   ===============

</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.

                                       -2-

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                CHINA BIOPHARMACEUTICALS HOLDINGS, INC. Shareholders
                               -----------------------------------------------------------------------------------
                               Preferred stock (series A)         Common Stock
                               --------------------------   ------------------------     Paid-in        Capital
                               Shares      Par value          Shares      Par Value      Capital      Receivable
                               ------   -----------------   ----------   -----------   ------------   -----------
<S>                            <C>      <C>                 <C>          <C>           <C>            <C>
BALANCE, December 31, 2007     50,000   $             500   36,490,312   $   364,903   $ 13,178,101   $  (252,471)

   Common shares issued for
     service                                                   100,000         1,000         26,000
   Stock based compensation                                                                  18,750
   Dividends and accretion
     on redeemable preferred
     stock
   Net income
   Statutory reserves
   Foreign currency
     translation adjustments
                               ------   -----------------   ----------   -----------   ------------   -----------
BALANCE, December 31, 2008     50,000   $             500   36,590,312   $   365,903   $ 13,222,851   $  (252,471)
   Cumulative effect of
     reclassification of
     warrants                                                                            (9,480,935)
                               ------   -----------------   ----------   -----------   ------------   -----------
BALANCE, January 1, 2009, as
   adjusted                    50,000                 500   36,590,312       365,903      3,741,916      (252,471)

   Net income
   Foreign currency
     translation adjustments

                               ------   -----------------   ----------   -----------   ------------   -----------
BALANCE, March 31, 2009
   (Unaudited)                 50,000   $             500   36,590,312   $   365,903   $  3,741,916   $  (252,471)
                               ======   =================   ==========   ===========   ============   ===========
<CAPTION>
                                 CHINA BIOPHARMACEUTICALS
                                HOLDINGS, INC. Shareholders
                               ------------------------------    Accumulated
                                Statutory      Accumulated      Comprehensive   Non-controlling
                                Reserves     Income (Deficit)   Income (Loss)       Interest         Totals
                               -----------   ----------------   -------------   ---------------   ------------
<S>                            <C>           <C>                <C>             <C>               <C>
BALANCE, December 31, 2007     $   976,439   $    (18,059,232)  $     389,084   $     5,942,144   $  2,539,468

   Common shares issued for
     service                                                                                            27,000

   Stock based compensation                                                                             18,750
   Dividends and accretion
     on redeemable preferred
     stock                                         (1,033,239)                                      (1,033,239)
   Net income                                       2,827,017                         3,922,048      6,749,065
   Statutory reserves              532,359           (532,359)                                               -
   Foreign currency
     translation adjustments                                          515,887           480,636        996,523
                               -----------   ----------------   -------------   ---------------   ------------
BALANCE, December 31, 2008     $ 1,508,798   $    (16,797,813)  $     904,971        10,344,828   $  9,297,566
   Cumulative effect of
     reclassification of
     warrants                                       8,425,482                                       (1,055,453)
                               -----------   ----------------   -------------   ---------------   ------------
BALANCE, January 1, 2009, as
   adjusted                      1,508,798         (8,372,331)        904,971        10,344,828      8,242,114

   Net income                                         975,515                         1,126,571      2,102,086
   Foreign currency
     translation adjustments                                          (15,134)          (14,321)       (29,454)

                               -----------   ----------------   -------------   ---------------   ------------
BALANCE, March 31, 2009
   (Unaudited)                 $ 1,508,798   $     (7,396,816)  $     889,837   $    11,457,078   $ 10,314,745
                               ===========   ================   =============   ===============   ============
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.

                                       -3-

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

   CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
                            MARCH 31, 2009 AND 2008
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 For the three month ended March 31,
                                                                 -----------------------------------
                                                                       2009               2008
                                                                 ---------------   -----------------
<S>                                                              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income attributable to controlling interest               $       975,515   $         803,933
   Net income attributable to non-controlling interest                 1,126,571           1,021,266
                                                                 ---------------   -----------------
       Net income                                                      2,102,086           1,825,199
   Adjustments to reconcile net income from operations to cash
     provided by operating activities:
     Amortization of shares issued for service                                 -               9,375
     Depreciation                                                        131,326             143,805
     Amortization                                                         43,417              61,597
     Bad debt expense                                                     80,759                   -
     Change in fair value of warrants                                    116,316                   -
   Change in operating assets and liabilities:
     Notes receivable                                                          -             (69,885)
     Accounts receivable                                                 369,536            (648,188)
     Accounts receivable - related parties                                     -                 110
     Other receivable and prepayments                                    310,092             509,400
     Advance to suppliers                                               (164,327)            395,790
     Advance to suppliers - related parties                                    -            (232,107)
     Inventories                                                      (3,593,607)           (241,671)
     Other assets                                                          3,334              38,908
     Accounts payable                                                  2,811,329              54,273
     Accounts payable - related parties                                        -             (77,037)
     Other payable and other current liabilities                        (123,250)           (647,743)
     Customer deposits                                                   233,068             968,007
     Taxes payable                                                      (388,729)            188,855
                                                                 ---------------   -----------------
       Net cash provided by operating activities                       1,931,350           2,278,688
                                                                 ---------------   -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of intangible assets                                          (3,162)                  -
   Purchase of equipment                                                (104,823)            (43,066)
   Purchase of construction-in-progress                               (1,003,714)         (2,000,563)
   Increase in other receivables - related parties                             -            (316,866)
   Decrease in short term Investment                                   4,384,553             419,310
   Repayment of loan to related party                                          -             134,958
   Loan to third party                                                (1,860,677)                  -
                                                                 ---------------   -----------------
       Net cash provided by (used in) investing activities             1,412,177          (1,806,227)
                                                                 ---------------   -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase in restricted cash                                           (62,599)           (210,704)
   Principal payment on bank loans                                    (1,172,080)           (279,540)
   Proceed from related parties, long-term                                50,543             202,275
   (Increase) decrease on notes payable                                 (367,740)            702,344
   Payments on long-term prepayments                                    (127,464)                  -
   Repayments on long term liabilities                                   (17,581)                  -
                                                                 ---------------   -----------------
       Net cash (used in) provided by financing activities            (1,696,921)            414,375
                                                                 ---------------   -----------------

EFFECT OF EXCHANGE RATE ON CASH                                           (1,556)            208,026
                                                                 ---------------   -----------------
INCREASE IN CASH                                                       1,645,050           1,094,862

CASH, beginning of period                                                581,727             669,699
                                                                 ---------------   -----------------
CASH, ending of period                                           $     2,226,777   $       1,764,561
                                                                 ===============   =================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Interest paid                                                 $        36,421   $               -
                                                                 ===============   =================
   Income taxes paid                                             $       293,220   $               -
                                                                 ===============   =================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.

                                       -4-

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
NOTE 1- ORGANIZATION AND OPERATIONS

China  Biopharmaceuticals  Holdings,  Inc.  ("CBH",  "We" and "the Company"),  a
Delaware  corporation,  was originally organized as a Corporation under the laws
of the state of New York on August 6,  1976.  Since  August  2004,  the  Company
acquired various  subsidiaries  located in mainland China ("PRC"). The principal
activities of the Company, through its subsidiaries, are research,  manufacture,
and the sale of drug raw materials and intermediates as well as prescription and
non-prescription  drugs and traditional  Chinese medicines.  The Company is also
engaged in the discovery,  development and commercialization of innovative drugs
and related bio-pharmaceutical products in China.

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  economic  market  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  that  require  consolidation.   Material
inter-company  transactions  have  been  eliminated  in the  consolidation.  The
consolidated financial statements of China Biopharmaceuticals Holdings, Inc. and
Subsidiaries reflect the activities of the following subsidiaries:

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

USE OF ESTIMATES

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses during the reporting  periods.  For example,  the Company estimates the
collectibility  of its receivables  which affects the carry value of the related
asset and estimates the fair value of share based compensation which affects the
amount of compensation recognized in earnings.  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.

Management has included all  adjustments,  consisting  only of normal  recurring
adjustments,  considered  necessary  to give a fair  presentation  of  operating
results  for  the  periods  presented.   Interim  results  are  not  necessarily
indicative  of results for a full year.  The  information  included in this Form
10-Q should be read in conjunction with information  included in the 2008 annual
report filed on Form 10-K.

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.  The
Company  reviews the carrying value of land use rights at least  annually,  more
often if  necessary,  to  determine  whether  their  carrying  value has  become
impaired.  Impairment  charges are recorded when the carrying value of the asset
exceeds future benefits to be derived from the asset.

                                       -5-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
PLANT AND EQUIPMENT, NET

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

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.

Construction  in progress  represents the costs incurred in connection  with the
construction  of buildings or new additions to the Company's  plant  facilities.
Interest   incurred  during  the  period  of  construction,   if  material,   is
capitalized.  No depreciation is provided for construction in progress until the
assets are completed and are placed into service.

Long-term  assets of the Company are reviewed at least  annually,  more often if
necessary,  to  determine  whether  their  carrying  value has become  impaired,
pursuant to the  guidelines  established  in Statement  of Financial  Accounting
Standards  (SFAS) 144,  "Accounting for the Impairment or Disposal of Long-Lived
Assets." As of March 31,  2009,  management  concluded  long term assets are not
impaired.

CASH AND CASH EQUIVALENTS

For  financial  reporting  purposes,  the Company  considers  all highly  liquid
investments  purchased with original maturity of three months or less to be cash
equivalents.

SHORT TERM INVESTMENT

In 2007,  the Company  opened an account with an investment  broker to invest in
short term  investments  in initial  public  offering  securities.  The  Company
classified the account balance as trading securities, which should be carried at
fair value with  unrealized  gains and losses  reported  as other  comprehensive
income.  Total  amount in this  account  was  $42,360  as of March 31,  2009 and
$4,432,657 as of December 31, 2008. For the three month ended March 31, 2009 and
2008,  the  Company  recorded  $10,646  and $0 as  realized  gain on  short-term
investment.

ACCOUNTS RECEIVABLE

Accounts receivable are carried at original invoice amount less an estimate made
for doubtful  receivables based on a monthly review of all outstanding  amounts.
Management's judgment and estimates are made in connection with establishing the
allowance for doubtful accounts. Specifically, the Company analyzes the aging of
accounts receivables balances,  historical bad debts, customer concentration and
credit-worthiness,  current  economic trends and changes in our customer payment
terms.   Significant  changes  in  customer  concentrations  or  payment  terms,
deterioration of customer  credit-worthiness  or weakening economic trends could
have a  significant  impact on the  collectibility  of the  receivables  and our
operating  results.  If  the  financial  condition  of  our  customers  were  to
deteriorate,  resulting  in an  impairment  of their  ability to make  payments,
additional  allowance may be required.  The ultimate collection of the Company's
accounts receivables may take over one year and accounts receivables outstanding
more than one year is considered to be written-off.

                                       -6-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
INVENTORIES

Inventories  are  stated  at the lower of cost or  market  using  the  first-in,
first-out  basis.  The Company reviews its inventory  periodically  for possible
obsolescence or to determine if any reserves are necessary.

PATENTS

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

RESEARCH AND DEVELOPMENT COSTS

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

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

ADVERTISING COSTS

The Company expenses the cost of advertising as incurred or, as appropriate, the
first time the advertising  takes place.  Advertising  costs for the three month
periods ended March 31, 2009 and 2008 amounted $50,294 and $17,616.

SHIPPING AND HANDLING COSTS

Shipping  and  handling  costs  related to costs of goods sold are  included  in
selling,  general and  administrative  costs were  $119,754 and $104,547 for the
three month periods ended March 31, 2009 and 2008, respectively.

CONCENTRATION OF RISKS

Cash includes cash on hand and demand deposits in accounts maintained with banks
within the People's  Republic of China,  Hong Kong and the Untied States.  Total
cash in  these  banks at March  31,  2009 and  December  31,  2008  amounted  to
$2,204,042  and  $580,492 of which  $31,573 and $0 deposits  are covered by FDIC
insurance,  respectively.  The  Company has not  experienced  any losses in such
accounts  and  believes  it is not  exposed  to any  risks  on its  cash in bank
accounts.

The Company sells  pharmaceutical  products to pharmacies  and  hospitals.  Five
major customers  accounted for approximately  16.8% and 36.0% of the net revenue
for the three month  periods  ended March 31,  2009 and 2008,  respectively.  No
sales revenue from single  customer was above 10% of total sales revenue for the
three month ended  March 31, 2009 and 2008.  As of March 31, 2009 and 2008,  the
total  receivable   balances  due  from  these  customers  were  $1,548,783  and
$1,213,581,  respectively,  representing  47.1%  and  21.0%  of  total  accounts
receivables.

For the three month periods ended March 31, 2009, five major suppliers  provided
approximately  44.6% of the  Company's  purchases  of raw  materials  with  each
supplier individually accounting for 20.9% 13.3%, and 10.4%,  respectively.  For
the  three  months  ended  March  31,  2008,   two  major   suppliers   provided
approximately 30% of the Company's purchases of raw materials with each supplier
individually accounting for 20% and 10%, respectively.

                                       -7-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS  107,  Disclosures  About  Fair  Value of  Financial  Instruments,  defines
financial  instruments  and requires fair value  disclosures of those  financial
instruments. SFAS 157, Fair Value Measurements, adopted January 1, 2008, defines
fair value,  establishes a three-level  valuation  hierarchy for  disclosures of
fair value  measurement  and enhances  disclosures  requirements  for fair value
measures. The carrying amounts reported in the accompanying consolidated balance
sheets for  receivables,  payables  and short term  loans  qualify as  financial
instruments are a reasonable  estimate of fair value because of the short period
of time between the origination of such instruments,  their expected realization
and, if applicable, the stated rate of interest is equivalent to rates currently
available. The three levels of valuation hierarchy are defined as follows:

      o     Level 1  inputs  to the  valuation  methodology  are  quoted  prices
            (unadjusted) for identical assets or liabilities in active markets.

      o     Level 2 inputs to the valuation  methodology  include  quoted prices
            for similar  assets and  liabilities in active  markets,  and inputs
            that are observable for the assets or liability,  either directly or
            indirectly,  for  substantially  the  full  term  of  the  financial
            instruments.

      o     Level 3 inputs to the valuation  methodology  are  unobservable  and
            significant to the fair value.

As of March 31,  2009,  the  carrying  value of the warrant  liabilities  in the
amount of $1,171,769.  The input to the valuation of the underlying  warrants is
adjusted on each financial  statement date based on the Company's  quoted prices
on the active stock market.

Balance of short term investment represented the quoted price of the securities
in active markets.

<TABLE>
<CAPTION>
                                              Fair Value Measurements Using Fair Value
                           Carrying Value                    Hierarchy
                                                    Level 1      Level 2       Level 3
<S>                      <C>                  <C>              <C>                 <C>
Short term investment    $          42,360    $      42,360            -             -

Warrants payables                1,171,769                -    1,171,769             -
                         -----------------    ----------------------------------------
Total                    $       1,214,129    $           -    1,214,129             -
                         =================    ========================================
</TABLE>

WARRANTS LIABILITIES

Effective  January 1, 2009,  the Company  adopted the  provisions  of EITF 07-5,
"Determining  Whether  an  Instrument  (or  Embedded  Feature)  is Indexed to an
Entity's Own Stock,"  which is effective  for  financial  statements  for fiscal
years beginning after December 15, 2008 and which replaced the previous guidance
on this topic in EITF 01-6. Paragraph 11(a) of FAS 133 specifies that a contract
that would otherwise meet the definition of a derivative but is both (a) indexed
to the Company's own stock and (b)  classified  in  stockholders'  equity in the
statement of financial  position would not be considered a derivative  financial
instrument. EITF 07-5 provides a new two-step model to be applied in determining
whether a financial  instrument or an embedded feature is indexed to an issuer's
own  stock  and thus  able to  qualify  for the FAS 133  paragraph  11(a)  scope
exception.

As a result of  adopting  EITF 07-5,  19,831,684  of our issued and  outstanding
warrants  previously  treated as equity  pursuant  to the  derivative  treatment
exemption were no longer afforded equity  treatment  because the strike price of
the warrants is  denominated  in US dollar,  a currency other than the Company's
functional  currency,  the Chinese Renminbi.  As a result,  the warrants are not
considered  indexed to the Company's own stock,  and as such, all future changes
in the fair value of these  warrants  will be  recognized  currently in earnings
until such time as the warrants are exercised or expired.

As such,  effective  January 1, 2009,  we  reclassified  the fair value of these
warrants  from  equity to  liability,  as if these  warrants  were  treated as a
derivative  liability  since their  corresponding  issuance dates. On January 1,
2009, we reclassified from additional  paid-in capital,  as a gain of cumulative
effect adjustment of $8,425,482 to beginning retained earnings and $1,055,453 to
long-term derivative instruments to recognize the fair value of such warrants on
such date. The fair value of these warrants  increased to $1,171,769 as of March
31, 2009.  As such,  we recognized a $116,316 loss from the change in fair value
of these warrants for the three months ended March 31, 2009.

                                       -8-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
These  warrants do not trade in an active  securities  market,  and as such,  we
estimate the fair value of these warrants using the Black-Scholes option pricing
model using the following assumptions:

<TABLE>
<CAPTION>
                                    March 31, 2009                       December 31, 2008
                              #A          #B           #C           #A           #B            #C
<S>                       <C>          <C>         <C>           <C>          <C>          <C>
Number of warrants        1,000,000    6,831,684   12,000,000    1,000,000    6,831,684    12,000,000

Annual dividend yield             -            -            -            -            -             -
Expected life (years)           0.8          0.9          3.1          1.1          1.2           3.4
Risk-free interest rate         0.5%         0.5%         1.4%         0.4%         0.4%          1.1%
Expected volatility           120.0%       124.5%       200.5%       137.5%       147.0%        200.7%
</TABLE>

Expected  volatility  is based  primarily on historical  volatility.  Historical
volatility was computed using daily pricing observations for recent periods that
correspond  to the term of the  warrants.  We believe  this  method  produces an
estimate that is  representative  of our expectations of future  volatility over
the expected  term of these  warrants.  We  currently  have no reason to believe
future  volatility over the expected  remaining life of these warrants is likely
to differ materially from historical  volatility.  The expected life is based on
the remaining term of the warrants.  The risk-free interest rate is based on the
U.S. Treasury securities with compatible life terms.

REVENUE RECOGNITION

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

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

Management  regularly reviews aging of receivables and changes in payment trends
by its customers,  and records a reserve when they believe collection of amounts
due are at risk.  The Company  reserved  20%, 50% and 100% for AR balances  with
aging  more than  six-month,  nine-month  and more than one year,  respectively,
based on the nature of the business and AR collection history

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

                                      -9-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
Revenue was made up of the following product categories.

                                               For the three month periods
                                                     ended March 31,
                                          ------------------- ------------------
                                                2009                2008
                                          ------------------   -----------------
                                                        (Unaudited)
                                          --------------------------------------
Revenue:

  Intermediary pharmaceuticals products   $        2,510,908   $       3,966,283
  Prescription drugs                              10,137,099           7,006,958
                                          ------------------   -----------------
Total revenue                             $       12,648,007   $      10,973,241
                                          ==================   =================

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.

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

COMPREHENSIVE INCOME

SFAS  130,  "Reporting  Comprehensive  Income,"  establishes  standards  for the
reporting and display of  comprehensive  income,  its components and accumulated
balances in a full set of general purpose financial statements. SFAS 130 defines
comprehensive  income to include all changes in equity  except  those  resulting
from investments by owners and distributions to owners. Among other disclosures,
SFAS 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  operating
subsidiaries'  financial records are maintained in its local currency,  Renminbi
(RMB);  therefore,  the Company's  functional  currency is the RMB..  Results of
operations  are translated at average  exchange rates during the period,  assets
and  liabilities  are  translated at the unified  exchange rate as quoted by the
People's  Bank of China at the end of each  reporting  period,  and  equity  are
stated at their  historical  rates.  Cash flows are also  translated  at average
translation rates for the period,  therefore,  amounts reported on the statement
of cash  flows will not  necessarily  agree  with  changes in the  corresponding
balances on the balance sheet.

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

Approval of foreign currency payments by the Bank of China or other institutions
requires submitting a payment application form together with invoices,  shipping
documents and signed  contracts.  Translation  adjustments  resulting  from this
process  are  included  in  accumulated  other   comprehensive   income  in  the
consolidated  statement  of  shareholders'  equity and  amounted to $889,837 and
$904,970, as of March 31, 2009 and December 31, 2008,  respectively.  Assets and
liabilities at March 31, 2009 and December 31, 2008 were  translated at 6.83 and
6.82 RMB to $1.00.  The average  translation  rates applied to income  statement
accounts,  statement  of cash flows for the three month  period  ended March 31,
2009 and the year ended of 2008 were 6.83 and 6.94 RMB to $1.00.  Cash flows are
also translated at average translation rates for the period, therefore,  amounts
reported on the statement of cash flows will not necessarily  agree with changes
in the corresponding balances on the balance sheet.

                                      -10-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
The Company  adjusted  385,807 from accumulated  other  comprehensive  income to
non-controlling  interest  which was presented as component of equity section as
of December  31,  2007 as a result of  application  of FAS 160 since  January 1,
2009.

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

EARNINGS PER SHARE

The Company adopted SFAS 128,  "Earnings per Share" ("EPS"),  which requires the
presentation  of earnings per share as Basic and Diluted EPS. Basic earnings per
share are calculated by taking net income divided by the weighted average shares
of common stock  outstanding  during the period.  Diluted  earnings per share is
calculated  by  taking  basic  weighted  average  shares  of  common  stock  and
increasing it for dilutive common stock  equivalents such as preferred stock, as
well as warrants and options that are in the money.

SHARES SUBJECT TO MANDATORY REDEMPTION

SFAS 150, "Accounting for Certain Financial  Instruments with Characteristics of
both  Liabilities  and  Equity"   establishes   classification  and  measurement
standards  for  three  types of  freestanding  financial  instruments  that have
characteristics of both liabilities and equity.  Instruments within the scope of
SFAS 150 must be classified  as  liabilities  within the Company's  Consolidated
Financial  Statements and be reported at settlement date value. EITF Topic D-98,
"Classification and Measurement of Redeemable Securities," requires contingently
redeemable  securities  to be classified  outside of permanent  equity until the
contingency  occurs, and then the instrument will need to be analyzed for proper
classification as a liability or permanent equity.

The Company issued  redeemable  stock in November 2007 related to the settlement
of notes payables owed to RimAisa.  Under the terms of the redeemable stock, the
issuer has the right to redeem and the holder has the right to convert  any time
up to and including the fourth anniversary of the issuance. Therefore, liability
accounting is not triggered under SFAS 150, because the stock is not mandatorily
redeemable until after the fourth anniversary.  However,  pursuant to EITF Topic
D-98,  the  redeemable  stock is  classified  outside of  shareholders'  equity,
because pursuant to the terms of the preferred stock, if the redeemable stock is
not converted by the fourth anniversary, then mandatory redemption is triggered,
and pursuant to SFAS 150, the shares will be reclassified to liabilities.

NON-CONTROLLING INTEREST

Effective  January 1,  2009,  the  Company  adopted  SFAS 160,  "Non-controlling
Interests in  Consolidated  Financial  Statements  - an amendment of  Accounting
Research Bulletin No. 51." ("FAS 160") Certain  provisions of this statement are
required  to  be  adopted  retrospectively  for  all  periods  presented.   Such
provisions  include a  requirement  that the carrying  value of  non-controlling
interests  (previously  referred to as minority  interests)  be removed from the
mezzanine section of the balance sheet and reclassified as equity.

Further,  as a result  of  adoption  on SFAS 160,  net  income  attributable  to
non-controlling interests is now excluded from the determination of consolidated
net income. In addition,  foreign currency  translation  adjustment is allocated
between controlling and non-controlling interests.

As a result of adoption of SFAS 160,  the Company  reclassified  non-controlling
interests  in the amounts of  $11,457,078  and  $10,344,828  from the  mezzanine
section to equity in the March 31, 2009 and December  31, 2008  balance  sheets,
respectively.

                                      -11-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
RECENT ACCOUNTING PRONOUNCEMENTS

In  March  2008,  the  FASB  issued  SFAS  161,  "Disclosures  about  Derivative
Instruments  and Hedging  Activities - An  Amendment of SFAS No. 133".  SFAS 161
seeks to improve  financial  reporting for  derivative  instruments  and hedging
activities by requiring enhanced  disclosures  regarding the impact on financial
position,  financial  performance,  and cash flows.  To achieve  this  increased
transparency,  SFAS  161  requires  (1) the  disclosure  of the  fair  value  of
derivative  instruments  and gains  and  losses  in a  tabular  format;  (2) the
disclosure  of  derivative  features  that  are  credit  risk-related;  and  (3)
cross-referencing within the footnotes.  SFAS 161 became effective on January 1,
2009 and has no impact of the Company's financial statements.

In May 2008,  the FASB issued SFAS 162,  "The  Hierarchy of  Generally  Accepted
Accounting  Principles".  FAS 162 is intended to improve financial  reporting by
identifying  a consistent  framework,  or hierarchy,  for  selecting  accounting
principles to be used in preparing  financial  statements  that are presented in
conformity with U.S. GAAP for nongovernmental entities. SFAS 162 is effective 60
days  following the SEC's approval of the Public  Company  Accounting  Oversight
Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity
with Generally  Accepted  Accounting  Principles." SFAS 162 has no impact on the
company's financial statements.

In June 2008, FASB issued EITF 08-4, "Transition Guidance for Conforming Changes
to Issue No. 98-5". The objective of EITF 08-4 is to provide transition guidance
for conforming changes made to EITF 98-5, "Accounting for Convertible Securities
with  Beneficial  Conversion  Features  or  Contingently  Adjustable  Conversion
Ratios",  that result from EITF 00-27  "Application of Issue No. 98-5 to Certain
Convertible  Instruments",  and SFAS  150,  "Accounting  for  Certain  Financial
Instruments with Characteristics of both Liabilities and Equity".  This Issue is
effective for financial statements issued for fiscal years ending after December
15, 2008. Early application is not permitted.  The new accounting  pronouncement
has no impact of the Company's financial statement.

On October 10, 2008, the FASB issued FSP 157-3, "Determining the Fair Value of a
Financial  Asset When the Market for That Asset Is Not Active," which  clarifies
the  application  of SFAS 157 in a market  that is not  active and  provides  an
example to illustrate  key  considerations  in  determining  the fair value of a
financial  asset when the market for that  financial  asset is not  active.  FSP
157-3  became  effective  on October 10,  2008,  and its adoption did not have a
material impact on our financial position or results.

In January 2009, the FASB issued FSP EITF 99-20-1, "Amendments to the Impairment
Guidance of EITF Issue No. 99-20, "Recognition of Interest Income and Impairment
on Purchased and Retained Beneficial Interests in Securitized Financial Assets".
FSP EITF 99-20-1  changes the impairment  model included within EITF 99-20 to be
more consistent with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves
this by  amending  the  impairment  model in EITF 99-20 to remove its  exclusive
reliance  on  "market  participant"  estimates  of  future  cash  flows  used in
determining   fair   value.   Changing   the   cash   flows   used  to   analyze
other-than-temporary impairment from the "market participant" view to a holder's
estimate of whether there has been a "probable" adverse change in estimated cash
flows allows  companies  to apply  reasonable  judgment in assessing  whether an
other-than-temporary  impairment has occurred.  The adoption of FSP EITF 99-20-1
did not have a material impact on our consolidated  financial statements.

In April 2009, the FASB issued FSP FAS 157-4,  "Determining  Fair Value When the
Volume  and Level of  Activity  for the Asset or  Liability  Have  Significantly
Decreased and  Identifying  Transactions  That Are Not  Orderly".  FSP FAS 157-4
amends SFAS 157 and provides  additional  guidance for estimating  fair value in
accordance  with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased and also includes guidance on identifying
circumstances  that  indicate  a  transaction  is not  orderly  for  fair  value
measurements.  This  FSP  shall  be  applied  prospectively  with  retrospective
application  not  permitted.  This FSP shall be effective for interim and annual
periods ending after June 15, 2009,  with early  adoption  permitted for periods
ending after March 15, 2009.  An entity early  adopting this FSP must also early
adopt  FSP  FAS  115-2  and  FAS  124-2,   "Recognition   and   Presentation  of
Other-Than-Temporary  Impairments".  Additionally,  if an entity elects to early
adopt either FSP FAS 107-1 and APB 28-1,  "Interim  Disclosures about Fair Value
of Financial  Instruments" or FSP FAS 115-2 and FAS 124-2, it must also elect to
early  adopt  this  FSP.  We are  currently  evaluating  this new FSP but do not
believe that it will have a significant impact on the determination or reporting
of our financial results.

                                      -12-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2. This FSP amends SFAS
115,  "Accounting for Certain  Investments in Debt and Equity  Securities," SFAS
124, "Accounting for Certain Investments Held by Not-for-Profit  Organizations,"
and EITF 99-20,  "Recognition  of Interest  Income and  Impairment  on Purchased
Beneficial  Interests  and  Beneficial  Interests  That Continue to Be Held by a
Transferor in Securitized  Financial  Assets," to make the  other-than-temporary
impairments  guidance  more  operational  and to  improve  the  presentation  of
other-than-temporary  impairments  in the  financial  statements.  This FSP will
replace the existing requirement that the entity's management assert it has both
the intent and ability to hold an impaired debt security  until  recovery with a
requirement  that  management  assert  it does not have the  intent  to sell the
security,  and it is more likely than not it will not have to sell the  security
before recovery of its cost basis. This FSP provides increased  disclosure about
the credit and noncredit  components of impaired  debt  securities  that are not
expected to be sold and also requires  increased  and more frequent  disclosures
regarding  expected cash flows,  credit losses,  and an aging of securities with
unrealized losses. Although this FSP does not result in a change in the carrying
amount  of  debt   securities,   it  does   require   that  the  portion  of  an
other-than-temporary   impairment   not   related   to  a  credit   loss  for  a
held-to-maturity security be recognized in a new category of other comprehensive
income and be  amortized  over the  remaining  life of the debt  security  as an
increase in the carrying value of the security.  This FSP shall be effective for
interim and annual  periods  ending  after June 15,  2009,  with early  adoption
permitted  for periods  ending after March 15,  2009.  An entity may early adopt
this FSP only if it also elects to early adopt FSP FAS 157-4. Also, if an entity
elects to early  adopt  either FSP FAS 157-4 or FSP FAS 107-1 and APB 28-1,  the
entity also is required  to early  adopt this FSP. We are  currently  evaluating
this new FSP but do not believe  that it will have a  significant  impact on the
determination or reporting of our financial results.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1.  This FSP amends SFAS
107 to  require  disclosures  about  fair  value of  financial  instruments  not
measured on the balance sheet at fair value in interim  financial  statements as
well as in annual financial statements. Prior to this FSP, fair values for these
assets and  liabilities  were only disclosed  annually.  This FSP applies to all
financial  instruments within the scope of SFAS 107 and requires all entities to
disclose the method(s)  and  significant  assumptions  used to estimate the fair
value of financial instruments.  This FSP shall be effective for interim periods
ending after June 15, 2009,  with early  adoption  permitted for periods  ending
after March 15, 2009.  An entity may early adopt this FSP only if it also elects
to early adopt FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2.  This FSP does not
require  disclosures for earlier periods  presented for comparative  purposes at
initial  adoption.  In  periods  after  initial  adoption,   this  FSP  requires
comparative  disclosures only for periods ending after initial adoption.  We are
currently evaluating the disclosure requirements of this new FSP.

RECLASSIFICATIONS

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

We made certain  reclassifications  of prior period amounts in the  consolidated
financial statements to conform to the 2009 presentation.  The reclassifications
were  to  reflect  the  retrospective  adoption  of SFAS  160,  "Non-controlling
Interests in  Consolidated  Financial  Statements,  an amendment to ARB 51". The
reclassifications had no impact on previously reported net income.

NOTE 3 - RESTRICTED CASH

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

                                             March 31, 2009
          Name of Bank                         (Unaudited)     December 31, 2008
----------------------------------           --------------    -----------------
Hua Xia Bank, Suzhou                         $        2,618    $           3,863
China CITIC Bank                                  1,431,332            1,369,365
----------------------------------           --------------    -----------------
                            Total            $    1,433,950    $       1,373,228
                                             ==============    =================

                                      -13-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
NOTE 4 - ACCOUNTS RECEIVABLE, NET

The reserve for bad debts was $1,280,099 and $1,200,983 at March 31, 2009 and
December 31, 2008.

Accounts receivable consisted of the following:

                                             March 31, 2009
                                               (Unaudited)    December 31, 2008
                                             --------------   -----------------
Accounts receivable                          $    4,196,463   $       4,572,208
Allowance for doubtful accounts                  (1,280,099)         (1,200,983)
                                             --------------   -----------------
           Accounts receivable, net          $    2,916,364   $       3,371,225
                                             ==============   =================

As of March 31, 2009 and December 31, 2008, management concluded its allowance
for bad debts were sufficient.

The following table consists of allowance for doubtful accounts.

Allowance for doubtful accounts, December 31, 2007             $      1,260,760
  Addition
  Recovery                                                             (140,058)
  Translation adjustment                                                 80,281
                                                               ----------------
Allowance for doubtful accounts, December 31, 2008             $      1,200,983
  Addition                                                              126,538
  Written-off                                                            (1,189)
  Recovery                                                                    -
  Translation adjustment                                                (46,233)
                                                               ----------------
Allowance for doubtful accounts, March 31, 2009                $      1,280,099
                                                               ================

NOTE 5 - INVENTORIES, NET

Inventories consisted of the following:

                                             March 31, 2009
                                               (Unaudited)    December 31, 2008
                                             --------------   -----------------
Raw materials                                $    3,752,521   $       2,043,597
Refinery materials                                2,793,240           2,231,623
Packaging supplies                                  327,254             274,282
Finished goods                                    5,141,182           3,859,646
Work in process                                     614,954             637,021
Sundry supplies                                      11,764              13,736
                                             --------------   -----------------
  Total inventory                                12,640,915           9,059,905
Minus: Inventory allowance                          (26,214)            (26,250)
                                             --------------   -----------------
   Total inventories, net                    $   12,614,701   $       9,033,655
                                             ==============   =================

As of March 31, 2009 and December 31, 2008, the Company reserved $26,214 and
$26,250 as inventory allowance, respectively.

                                      -14-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
NOTE 6 - PLANT AND EQUIPMENT, NET

Plant and equipment consisted of the following:

                                             March 31, 2009
                                               (Unaudited)    December 31, 2008
                                             --------------   -----------------
Plant                                        $    2,479,526   $       2,446,124
Office equipment                                     28,391              28,420
Machinery                                         7,444,889           7,386,881
Vehicles                                            258,112             258,300
Construction in progress                          8,373,389           7,379,805
                                             --------------   -----------------
  Total plant and equipment                      18,584,307          17,499,530
  Less: accumulated depreciation                 (5,967,779)         (5,844,350)
                                             --------------   -----------------
        Plant and equipment, net             $   12,616,528   $      11,655,180
                                             ==============   =================

Depreciation  expense for the three month  periods ended March 31, 2009 and 2008
amounted to $131,326 and  $143,805,  respectively.  For the three month  periods
ended  March 31,  2009 and 2008,  the  Company  capitalized  interest as part of
construction-in-progress  amounting  of $36,423  and  $1,799  with 6.1% and 7.1%
effective weighted average interest rate, respectively.

NOTE 7 - INTANGIBLE ASSETS

Intangible assets consist of the following:

                                             March 31, 2009
                                               (Unaudited)    December 31, 2008
                                             --------------   -----------------
Land use rights:                             $    8,053,960   $       8,058,504
Less: accumulated amortization                     (683,845)           (641,074)
                                             --------------   -----------------
     Land use rights, net                         7,370,115           7,417,430
                                             --------------   -----------------

Patent - Approved drugs                             190,450             190,710
Less: accumulated amortization                      (21,054)            (21,083)
                                             --------------   -----------------
   Patent, net                                      169,396             169,627
                                             --------------   -----------------
      Total intangible assets, net           $    7,539,511   $       7,587,057
                                             ==============   =================

Land use rights are pledged as collateral for bank loans and notes payable as of
March 31, 2009.  Amortization  expenses for the three month  periods ended March
31, 2009 and 2008 amounted $43,417 and $61,597, respectively.

One of the Company's  patent of approved drug was fully  amortized  during 2008,
$151,790 of costs and  accumulated  amortization  were deducted from  intangible
asset account.

The following table consists of the expected  amortization  expense for the next
five years:

                   Years ended March 31,          Amount
                                            -----------------
                                   2010     $         173,668
                                   2011               173,668
                                   2012               173,668
                                   2013               173,668
                                   2014               173,668
                             Thereafter             6,671,171
                                            -----------------
                                  Total     $       7,539,511
                                            =================

                                      -15-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
NOTE 8 - RELATED PARTIES TRANSACTIONS

OTHER RECEIVABLES - RELATED PARTIES

Other receivable  contained the following related party balances where Enshi was
the  discontinued  subsidiary  since July 2007. Chris Peng Mao is the CEO of the
Company. Lufan An & Xiaohao Liu are both shareholders of the Company.

<TABLE>
<CAPTION>
                                                                                       Manner of
                 March 31, 2009     December 31, 2008        Due From        Term      Settlement
                ----------------    -----------------    --------------   ----------- ----------
                   (Unaudited)
<S>             <C>                 <C>                  <C>              <C>            <C>
CBH             $         46,058    $          46,058    Chris Peng Mao   Short Term     Cash
Keyuan                    38,421               38,460       Lufan An      Short term     Cash
CBH                      265,442              265,442         Enshi       Short Term     Cash
------------    ----------------    -----------------
    Total       $        349,921    $         349,960
                ================    =================
</TABLE>

OTHER PAYABLES - RELATED PARTIES

<TABLE>
<CAPTION>
                                                                                       Manner of
               March 31, 2009   December 31, 2008          Due To            Term      Settlement
              ----------------  -----------------  ----------------------  ----------  ----------
                (Unaudited)
              ----------------
<S>           <C>               <C>                <C>                     <C>           <C>
Erye          $        542,456  $         499,186            Erye Trading  Short Term    Cash
CBH                    173,428            166,838            Erye Trading  Short Term    Cash
Keyuan                     670                670  Lufan An & Xiaohao Liu  Short Term    Cash
------------  ----------------  -----------------
    Total     $        716,554  $         666,694
              ================  =================
</TABLE>

Erye  Trading  was a company  owned by  minority  shareholders  of  Suzhou  Erye
Pharmaceutical Limited Company. The 38 minority shareholders of Erye transferred
their  shares  of  Erye to  Erye  Trading  in  2008  and  the  transactions  was
consummated on June 24, 2008.  Erye Trading is the 49% shareholder of Erye as of
December 31, 2008.

NOTE 9 - SHORT TERM LOANS

The Company has a total of  $1,435,700  and  $2,611,260 in short term loans from
different banks in China at March 31, 2009 and December 31, 2008,  respectively.
These  loans  mature  in one year or  less.  The  average  interest  rates  were
approximately  6.1% and 7.1% for the three month period ended March 31, 2009 and
the year ended December 31, 2008,  respectively.  Bank loans were collateralized
by certain buildings owned by Erye with historical value of $127,749 as of March
31, 2009.

Interest  expense of the short term bank loans for the three month periods ended
March 31, 2009 and 2008 amounted to $36,423 and $36,295  respectively,  in which
$36,423 and $1,799 were capitalized for construction in progress, respectively.

NOTE 10 - NOTES PAYABLE

The Company's  subsidiary Erye has $4,189,900 and $4,563,837 notes payable as of
March 31, 2009 and December 31,  2008,  respectively.  Notes are payables to the
banks who issue bank notes to Erye's suppliers.  Notes payable are interest free
and usually mature after a six-month period.

In order to issue notes  payable on behalf of the  Company,  the banks  required
collateral,  such as cash deposit which was approximately 30%-50% of notes to be
issued,  or  properties  owned by  companies  or etc.  As of March 31,  2009 and
December 31, 2008,  $1,433,950 and $1,373,228 of restricted  cash was put up for
collateral   for  the  balance  of  notes  payable,   respectively,   which  was
approximately 30% of the notes payable (See notes 3) the Company issued, and the
remaining of the notes payable is  collateralized by a pledge the land use right
the Company owned amounted to $1,843,137 and $1,880,477, respectively.

                                      -16-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
NOTE 11 - REDEEMABLE PREFERRED STOCK

On  November  16,  2007,  the  Company  entered a  conditional  loan  conversion
agreement (the  "Agreement")  with RimAsia,  under which the principal amount of
the $11.5 million loan owed to RimAsia in connection with the Enshi acquisitions
plus unpaid interest of $1,008,534 (combined total of $12,508,534) was converted
into 6,185,607 shares of Series B redeemable convertible preferred shares of the
Company at an  effective  conversion  price at $2.0222 per share.  Each series B
share  may be  converted  into two  shares of common  stock.  Additionally,  the
exercise price of $1.375 for the 12 million existing  warrants  exercisable into
common stock  previously  issued to and currently  held by RimAsia in connection
with the extension of the loan  financing  ("Existing  Warrants") was lowered to
$1.26 per share and the term extended to 4.5 years from the closing  date.  This
Agreement  was  conditional  subsequent  to the  completion  of at least  one of
sizeable acquisition by the end of June 2008. RimAsia extended the wavier to not
to convert  the Series B  preferred  stock to debt to earlier of (a) October 31,
2009 or (b)  abandonment  of the merger with NeoStem  which is disclosed in Note
18.

Under the terms of the redeemable  stock, the issuer has the right to redeem and
the  holder  has the right to convert  any time up to and  including  the fourth
anniversary of the issuance.  Pursuant to EITF Topic D-98, the redeemable  stock
is classified outside of permanent equity.

According to the Agreement,  the series B preferred stock is subject to optional
redemption at the Company's  option before the 4th  anniversary of issuance date
and mandatory  redemption at the investors of the Company's  option  thereafter.
The Company maybe required to repurchase the remaining  series B preferred stock
four years  after the  closing  date at a per share  price of the sum of (1) the
original  Series B issue  price  $2.0222  per share;  (2) all accrued but unpaid
annual dividends;  (3) 5% of the original series B issue price per annum accrued
from the occurrence of certain triggering events,  such as the Company's failure
to pay annual  dividends,  mandatory  redemption  price or any other amount due,
either in cash or in kind. (4)The  four-percent  suspendible premium which shall
be deemed to have  begun to accrue  from the  Series B  Issuance  date and shall
continue to accrue until the date when the average  closing  price of the common
stock over 30 consecutive  trading days each with a daily treading  volume of no
fewer than 100,000 shares exceeds the following price thresholds: during the 2nd
year from the Series B Issuance  date,  $1.4,  during the 3rd year,  $1.58,  and
during the 4th year, $1.72.

On March 31, 2009,  RimAsia  waived the dividend of 5% of the original  Series B
issue price and 4%  suspendible  premium for the period from  September 15, 2008
through the earlier of (a)  October 31, 2009 and (b)  abandonment  of the Merger
Agreement.  However,  RimAsia  reserves  the right to  reinstate  all the waived
dividends  and  premiums  if  the  Merger  announced  on  November  2008  is not
consummated by October 31, 2009.

The  series  B  redeemable  stock  was  recorded  at fair  value  on the date of
issuance.  As of March 31, 2009 and December 31, 2008, balance stock amounted to
$12,508,534.  Dividend  payables amounted to $1,110,346 as of March 31, 2009 and
December 31, 2008.  As of March 31,  2009,  pursuant to the optional  redemption
clause,  the  holders  of the  series B are be  entitled  to  receive  an annual
dividend of 5% amounted to $651,129;  and, the four-percent  suspendible premium
was accrued in the amount of $459,217,  which were included in dividend payable.
For the three month periods ended March 31, 2009 and 2008, the Company  recorded
$0 and $311,857  dividends  and  accretion on the  redeemable  preferred  stock,
respectively.

On November 2, 2008,  the Company  entered into an Agreement  and Plan of Merger
(the "Merger  Agreement") with Neostem,  Inc., a Delaware  corporation,  and CBH
Acquisition LLC ("Merger Sub"), a Delaware "NBS" limited  liability  company and
wholly-owned subsidiary of Neostem.  Pursuant to the Merger Agreement,  CBH will
merge into  Merger  Sub,  with Merger Sub as the  surviving  entity.  All of the
shares of the Company's series B shares issued and outstanding immediately prior
to the effective time of the Merger will be converted into (i) 5,383,009  shares
of NeoStem Common Stock, (ii) 6,977,512 shares of Series C Convertible Preferred
Stock,  without par value,  of NeoStem,  each with a  liquidation  preference of
$1.125  per share and  convertible  into  shares of  NeoStem  Common  Stock at a
conversion  price of $0.90 per share,  and (iii) warrants to purchase  2,400,000
shares of NeoStem Common Stock at an exercise price of $0.80 per share.

                                      -17-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
NOTE 12 - STATUTORY RESERVES

The laws  and  regulations  of the PRC  require  that  before  foreign  invested
enterprise  can  legally  distribute  profits,  it must  first  satisfy  all tax
liabilities,  provide for losses in previous  years,  and make  allocations,  in
proportions  determined at the  discretion of the board of directors,  after the
statutory reserves.  The statutory reserves include the surplus reserve fund and
the common welfare fund.

The  Company is required to transfer  10% of its net income,  as  determined  in
accordance with the PRC accounting rules and regulations, to a statutory surplus
reserve fund until such reserve balance reaches 50% of the Company's  registered
capital.  This statutory  reserve fund is planned for future  development of the
company or use for  employee's  benefits.  These reserves  represent  restricted
retained earnings.

The transfer to this reserve must be made before  distribution  of any dividends
to shareholders. The surplus reserve fund is non-distributable other than during
liquidation and can be used to fund previous  years' losses,  if any, and may be
utilized for business  expansion or converted  into share capital by issuing new
shares to  existing  shareholders  in  proportion  to their  shareholding  or by
increasing the par value of the shares currently held by them, provided that the
remaining  reserve  balance  after  such  issue  is  not  less  than  25% of the
registered capital. The Chinese government restricts distributions of registered
capital and the additional  investment  amounts  required by a foreign  invested
enterprise.   Approval  by  the  Chinese  government  must  be  obtained  before
distributions of these amounts can be returned to the shareholders.

The Company had fully  contributed  its required  surplus reserve as of December
31, 2008. As of March 31, 2009,  the Company has statutory  surplus  reserve and
common welfare reserve amounted to $1,448,100 and $60,698, respectively.

NOTE 13 - INCOME TAXES

CORPORATION INCOME TAX (CIT)

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

Effective  January 1, 2008, the New  Enterprise  Income Tax ("EIT") law replaced
the  existing  laws  for  Domestic  Enterprises  ("DES")  and  Foreign  Invested
Enterprises ("FIEs"). The new standard EIT rate of 25% has replaced the 33% rate
previously  applicable to both DES and FIEs. Companies  established before March
16,  2007  will  continue  to enjoy  tax  holiday  treatment  approved  by local
government  for a grace period of the next 5 years or until the tax holiday term
is completed, whichever is sooner.

The Company's  subsidiaries,  Suzhou Erye was established  before March 16, 2007
and  therefore  is  qualified  to  continue  enjoying  the  reduced  tax rate as
described above.  Erye was granted income tax exemption for two years commencing
from  January 1, 2006,  and is subject to 50% of the 25% EIT tax rate,  or 12.5%
from  January 1, 2008  through  December 31,  2010.  Keyuan's  total  revenue is
subject  to 1.7% to 3.3%  income tax rates  depends on the range of the  taxable
income.  Provision  for CIT  amounted  $349,060 and $299,409 for the three month
periods ended March 31, 2009 and 2008, respectively.

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

                                     For the three month periods ended March 31,
                                             2009                  2008
                                     --------------------   -------------------
U.S. Statutory rate                                  34.0%                 34.0%
Foreign income not recognized in USA                (34.0)                (34.0)
China income taxes rate                              25.0                  25.0
China income tax exemption                          (12.5)                (12.5)
Other items (1)                                       1.7                   1.6
                                     --------------------   -------------------
Total provision for income taxes                     14.2%                 14.1%
                                     ====================   ===================

(1) The 1.7%  represents the $208,108  expenses  incurred by CBH and Keyuan that
are not  deductible  in PRC for the three months ended March 31, 2009.  The 1.6%
represents  $270,664 expenses incurred by CBH and Keyuan that are not counted as
part of taxable  income and expenses in PRC for the three months ended March 31,
2008.

                                      -18-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
The  estimated tax savings due to the reduced tax rate for the years ended March
31, 2009 and 2008 are $349,060  and  $299,409,  respectively.  The net effect on
income per basic  outstanding  share if the income  tax had been  applied  would
decrease  income per share by $0.01 and $0.01 for the years ended March 31, 2009
and 2008, respectively.

The Company was  incorporated  in the United States and incurred a net operating
loss for income tax purposes  for 2008 and 2007.  The net  operating  loss carry
forwards  for United  States  income tax  purposes  amounted to  $5,290,658  and
$5,239,906 as of March 31, 2009 and December 31, 2008,  respectively,  which may
be available to reduce future years' taxable  income.  These carry forwards will
expire, if not utilized,  in 2029.  Management  believes that the realization of
the  benefits  arising  from this loss appear to be  uncertain  due to Company's
limited  operating  history and  continuing  losses for United States income tax
purposes.  Accordingly,  the Company has provided a 100% valuation  allowance at
March  31,  2009 and  December  31,  2008.  Management  reviews  this  valuation
allowance periodically and makes adjustments as warranted

The  valuation  allowance  for the three month  periods ended March 31, 2009 and
2008 were as follow:

                                                                   Amount
                                                          ---------------------
Balance of December 31, 2008                              $           1,781,568
Increase                                                                 17,256
                                                          ---------------------
Balance of March 31, 2009 (unaudited)                      $           1,798,824
                                                          =====================

BUSINESS TAX

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

VALUE ADDED TAX ("VAT")

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

VAT on sales and VAT on purchases  amounted to $2,295,172 and $2,038,302 for the
three month period ended March 31, 2009,  and  $1,863,365 and $1,574,092 for the
same period in 2008,  respectively.  Sales and purchases are recorded net of VAT
collected and paid as the Company acts as an agent for the government. VAT taxes
are not impacted by the income tax holiday.

TAX PAYABLE

Taxes payable was comprised as follows:

                                             March 31, 2009
                                              (Unaudited)      December 31, 2008
                                             --------------    -----------------
Income tax payable                           $   1,606,626     $       1,551,754
VAT payable                                        216,419               657,978
Other taxes payable                                    898                 5,935
                                             --------------    -----------------
Total                                        $   1,823,943     $       2,215,667
                                             ==============    =================

NOTE 14 - EARNINGS PER SHARE

                                      -19-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
The Company  determined  that all the warrants  were  anti-dilutive  because the
exercise prices were higher than average market price in the period presented as
of March 31,  2009 and  2008.  The  redeemable  convertible  preferred  stock is
mandatorily  redeemable for cash at the fourth anniversary if not yet converted.
As of March 31, 2009 and 2008,  none of the preferred  stock had been converted.
Dividends and accretion on the preferred  stock were  subtracted from net income
to determine  net income  available to common  shareholders  for the purposes of
computing basic earnings per share. In calculating  diluted  earnings per share,
the  convertible  preferred  stock is treated as common stock  equivalents on an
as-converted  basis.  Dividends and  accretion on the preferred  stock are added
back to the net income available to common  shareholders for calculating diluted
earnings per share, as if the preferred stock were converted at the beginning of
the period. The convertible  preferred stock - series A of 50,000 and redeemable
convertible  preferred stock - series B of 6,185,607 were dilutive for the three
month period ended March 31, 2009, which were  anti-dilutive for the three month
ended March 31, 2008 based on the calculation used method above.

The number of shares used in  computing  basic  earnings per share for the three
month  periods  ended March 31, 2009 and 2008 were  36,590,312  and  36,490,312,
respectively.  Basic  earnings per share for the three month periods ended March
31, 2009 and 2008 were $0.03 and $0.01, respectively.

The number of shares used in computing  diluted earnings per share for the three
month  periods  ended March 31, 2009 and 2008 were  49,011,526  and  48,911,526,
respectively. Diluted earnings per share for the three month periods ended March
31, 2009 and 2008 were $0.02 and $0.01, respectively.

NOTE 15 - COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases office space from third parties.  Accordingly,  for the three
month  periods  ended  March 31,  2009 and 2008,  the  Company  recognized  rent
expenses of $6,592 and $33,443, respectively.

As of March 31, 2009, the Company has no  outstanding  commitments in respect to
non-cancelable operating leases.

RESEARCH AND DEVELOPMENT CONTRACT

On November 5, 2007, the Company  entered into a new drug  development  contract
with a third party ("the  Developer").  Pursuant to the contract,  the Developer
will  transfer  a drug  patent  to the  Company,  and  also is  responsible  for
obtaining the New Drug Certificate and the Drug Manufacturing  Approval from the
PRC Drug Administration  Authority no later than July 1, 2009. In exchange,  the
Company  will  pay  up  to  approximately  $1,600,000   (RMB12,000,000)  to  the
Developer.  Of the total  $1,600,000,  approximately  $933,800 and $266,800 will
need to be paid before  December 31, 2007 and  February 25, 2008,  respectively,
and the final payment ranging from $0 to $400,200  (depending on the date of the
Manufacturing  Approval)  needs to be paid no later than 10 days after the grant
date of the  Manufacturing  Approval.  Further,  the two parties agreed that the
Company will pay sales  commission to the Developer based on the sales volume of
the  contracted  new drug  during a 10 year  period  after this drug is put into
production.  If the PRC Drug Administration  Authority denies the application of
the Drug Manufacturing, all payments made by the Company would be fully returned
to the Company by the Developer.  As of March 31, 2009, the new drug has been in
the trial stage. The Company expected the developing  contract to delay one more
year to complete.

The Company had advanced $1,319,759 (RMB9,008,596) and $1,321,561 (RMB9,008,596)
for the  aforesaid  contract  as of  March  31,  2009  and  December  31,  2008,
respectively.

PURCHASE COMMITMENT

The  Company  entered  a  Long-term  purchase  contract  with  one of its  major
suppliers  ("Supplier  A") for the  period of May 1, 2006 to April 30,  2009 and
later extended to November 30, 2009. Pursuant to the contract, Erye committed to
purchase  certain  quantity for some raw  materials  from  Supplier A in a fixed
price  with VAT  invoice  and pay the  purchase  price  with bank  notes or bank
remittance  within 30 days after raw materials are delivered.  Should supplier A
could not provide the raw  materials  on time for which the contract was default
by Supplier A, Supplier A should pay penalty to the Company amounted to $146,500
(RMB1,000,000) and other related loss. The fixed purchase price was adjusted one
time on November 18, 2008 in an  amendment on which the two parties  agreed that
no more price increase allowed during the rest period of the contract.

                                      -20-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
For the three month ended March 31, 2009,  the Company  purchased  raw materials
from the aforesaid  supplier amounted to $965,794 to which the Company had notes
payable in the amount of $219,750 as of March 31, 2009.

LEGAL PROCEEDINGS

In March 2007, the Company  identified  non-existent  trade accounts  receivable
acquired in the  acquisition of Enshi.  RACP  Pharmacentical  Holdings  Limited,
("RACP"),  a former  subsidiary of CBH commenced legal proceeding for damages of
$10,000,000 against Mr. Li Xiaobo ("Mr. Li"), the previous owner and controlling
shareholder  of Enshi,  and his  related  parties  ("Defendants")  for breach of
representations  and  warranties  and fraud  ("LXB  Litigation").  The Hong Kong
courts froze  approximately  $10,000,000  worth of assets per the court order in
Hong Kong and the Defendants lost their  opposition  actions against the seizure
order.

In July 2007,  Enshi was  foreclosed  on by RimAsia and ceased to be part of the
Company.  RimAsia  assumed the litigation  activities  against Mr. Li Xiaobo and
certain other  defendants in connection  with the acquisition of shares of Enshi
("LXB") and on October 17,  2008_reached a settlement with LXB pursuant to which
Enshi was returned to LXB against a payment of certain sum of funds of which the
residual sum post  litigation  costs were to be  eventually  transferred  to the
Company. The expected residual is not expected to be meaningful to the Company.

On November  16, 2007 and amended on January 22,  2008,  the Company and RimAisa
entered into a litigation agreement ("Litigation  Agreement").  Pursuant to this
Litigation  Agreement,  if RimAisa or RACP (as the plaintiff) prevail in the LXB
Litigation or the settlement is reached, any judgment awards,  settlement amount
and salvage value  realized  from Enshi,  would be firstly used to reimburse all
the legal and related expenses incurred by RimAsia in the LXB Litigation,  up to
$4,000,000, and the remaining amounts of the judgment proceeds would be entitled
to the Company. If RimAisa and the Company do not prevail in the LXB Litigation,
RACP should be returned to CBH and all the  proceeds of any sale of  liquidation
of Enshi or any assets of or interest in Enshi shall be distributed as agreed by
both  parties.  In addition,  all the costs and expenses  (including  attorneys'
fees) incurred by or on behalf of the  plaintiffs  shall be borne 55% by RimAsia
and 45% by the Company.

On September 1, 2008, the Company and RimAisa entered into an  Understanding  on
Litigation   Residual   Payment   (the   "Understanding").   Pursuant   to  this
Understanding,  if there is no  consummation  of the Merger,  the gross residual
(the "Gross  Residual")  from the LXB  Litigation  receivable  by CBH (being the
gross  settlement  proceeds  of the LXB  litigation  paid by Li Xiao Bo less the
litigation and related  expenses  incurred by and reimbursed to RACP pursuant to
the Litigation  Agreement shall be paid to CBH in cash or shares of common stock
and warrants to purchase common stock of NBS  (collectively,  "NBS Securities"),
such NBS Securities being valued at their original purchase price but in no case
to be more  than  (a)  US$1,250,000  or (b) the  value  of the  Gross  Residual,
whichever is less,  and only to the extent there is any such  residual  from the
LXB litigation.  Any amount of the Gross Residual  remaining after deducting the
value of NBS  Securities  under  the  immediately  preceding  sentence  shall be
immediately paid to CBH in cash. In case of a closing of the Merger, RACP may no
longer  deliver such NBS Securities to CBH, but shall be able to deliver to Erye
Economy & Trade Ltd ("EET") NBS  Securities,  valued at their purchase price and
up to an amount equal to 50% of the "Net  Residual"  (to be defined  below),  in
exchange for the withholding of an equal amount of cash from the Gross Residual,
pursuant  to the  terms of an  agreement  with EET that will be  documented  and
signed prior to or at the closing of the Merger.  The "Net  Residual"  means the
Gross Residual minus the sum of (a) US$1.3 million  representing  the legal fees
and costs and the  un-reimbursed  advances and expenses made by Erye to Shenyang
Enshi  Pharmaceutical Ltd. and CBH, and (b) US$300,000 for operating expenses of
CBH over the next 12 months.

                                      -21-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
NOTE 16 - SHAREHOLDERS' EQUITY

ISSUANCE OF SHARES FOR SERVICES

In  December  2008,  the  Company  issued  100,000  shares of common  stock to a
consultant  for the  services  provided  during the period from  January 2007 to
February  2009.  Shares were valued at $27,000  based on the market price at the
service contract signing dates.

WARRANTS

Following  is a summary of the status of warrants  outstanding  at December  31,
2008:

   Outstanding Warrants        Exercisable Warrants
--------------------------------------------------------------------------------
                               Average
                              Remaining      Average
  Exercise                   Contractual     Exercise                 Intrinsic
   Price         Number         Life          Price        Number       Value
------------   -----------   -----------    ----------   ----------   ----------
        1.26    12,000,000          3.14          1.26   12,000,000            -
        1.25     1,000,000           0.8          1.25    1,000,000            -
        1.26     7,165,535           0.9          1.26    7,165,535            -
               -----------   -----------    ----------   ----------   ----------
               20, 165,535                               20,165,535            -
               ===========                               ==========

Following is a summary of the Warrant activity:

                                                                     Warrants
Outstanding as of January 01, 2008                                   21,889,975
Granted                                                                       -
Forfeited                                                             1,639,833
Exercised                                                                     -
                                                                 ---------------
Outstanding as of December 31, 2008                                  20,250,142
Granted                                                                       -
Forfeited                                                                84,607
Exercised                                                                     -
                                                                 ---------------
Outstanding as of March 31, 2009                                     20,165,535
                                                                 ===============

NOTE 17 - BUSINESS COMBINATIONS

MERGER WITH NEOSTEM, INC.

As  previously  mentioned  in Note 12, on November 2, 2008,  CBH entered into an
Agreement and Plan of Merger (the "Merger  agreement") with CBC, NeoStem,  Inc.,
and CBH Acquisition LLC ("Merger Sub").  The Merger  Agreement  contemplates the
merger of CBH with and into Merger Sub, with Merger Sub as the surviving  entity
(the "Merger").  Prior to the consummation of the Merger,  CBH will spin off all
of its shares of capital  stock of CBC to CBH's  stockholders  in a  liquidating
distribution  so that the only material  assets of CBH  following  such spin-off
will be CBH's 51% ownership  interest in Erye,  plus net cash which shall not be
less than $550,000.

Pursuant  to the terms and  subject  to the  conditions  set forth in the Merger
Agreement,  all of CBH's  common  stock,  par value $.01 per  share,  issued and
outstanding  immediately  prior  to  the  effective  time  of  the  Merger  (the
"Effective Time") will be converted into the right to receive, in the aggregate,
7,500,000  shares of NeoStem's  common stock at par value of $.001 per share (of
which 150,000  shares will be held in escrow  pursuant to the terms of an escrow
agreement to be entered into between CBH and NeoStem).

Subject to the  cancellation  of outstanding  warrants to purchase shares of CBH
Common Stock held by RimAsia,  all of the shares of CBH series B preferred stock
solely  held  by  RimAsia,  issued  and  outstanding  immediately  prior  to the
Effective  Time  will  be  converted  into  NeoStem's  common  stock,  series  C
convertible preferred stock and warrants to purchase NeoStem's common stock. See
details in Note 13.

                                      -22-

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

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009
                                   (Unaudited)
--------------------------------------------------------------------------------
At the Effective  Time, in exchange for  cancellation  of all of the outstanding
shares of CBH  series A  convertible  preferred  stock  which is held by Stephen
Globus,  a director of CBH,  and/or related  persons,  NeoStem will issue to Mr.
Globus and/or related persons 50,000 shares of NeoStem common stock at $1.00 per
share.  NeoStem  also will issue  60,000  shares of NeoStem  Common Stock to Mr.
Globus and 40,000  shares of NeoStem  common  stock to Chris Peng Mao, the Chief
Executive  Officer of CBH, in exchange for the cancellation and the satisfaction
in full of indebtedness in the aggregate  principal amount of $90,000,  plus any
and all accrued but unpaid  interest  thereon,  and other  obligations of CBH to
Globus  and Mao.  NeoStem  will  bear 50% of up to  $450,000  of CBH's  expenses
post-merger,  and satisfaction of the liabilities of Messrs. Globus and Mao will
count toward that  obligation.  NeoStem also will issue 200,000 shares to CBC to
be held in escrow,  payable if NeoStem  successfully  consummates its previously
announced  acquisition of control of Shandong New Medicine Research Institute of
Integrated Traditional and Western Medicine Limited Liability Company.

Also at the Effective  Time,  subject to acceptance by the holders of all of the
outstanding warrants to purchase shares of CBH common stock (other than warrants
held by RimAsia),  such warrants shall be canceled and the holders thereof shall
receive  warrants to purchase up to an aggregate  of up to  2,012,097  shares of
NeoStem common stock at an exercise price of $2.50 per share.

Upon  consummation of the  transactions  contemplated by the Merger,  Merger Sub
will own 51% of the  ownership  interests  in Erye,  and Suzhou Erye Economy and
Trading  Co.  Ltd.,  a company  incorporated  in the PRC  ("EET"),  will own the
remaining 49% ownership interest. In connection with the execution of the Merger
Agreement,  NeoStem,  Merger Sub and EET have negotiated a revised joint venture
agreement (the "Joint Venture  Agreement"),  which,  subject to finalization and
approval by the requisite PRC  governmental  authorities,  will become effective
and will  govern the rights and  obligations  with  respect to their  respective
ownership  interests in Erye.  Pursuant to the terms and conditions of the Joint
Venture Agreement,  dividend distributions to EET and Merger Sub will be made in
proportion to their respective ownership interests in Erye;  provided,  however,
that for the three-year  period  commencing on the first day of the first fiscal
quarter  after  the  Joint  Venture  Agreement  becomes  effective,  (i)  49% of
undistributed  profits  (after tax) will be  distributed to EET and lent back to
Erye by EET for use by Erye in connection  with the  construction of a new plant
for Erye;  (ii) 45% of the net profit  (after  tax) will be  provided to Erye as
part of the new plant  construction fund, which will be characterized as paid-in
capital for Merger  Sub's 51%  interest in Erye;  and (iii) 6% of the net profit
will be distributed to Merger Sub directly for NeoStem's operating expenses.  In
the  event  of the sale of all of the  assets  of Erye or  liquidation  of Erye,
Merger Sub will be  entitled to receive  the return of such  additional  paid-in
capital  before  distribution  of Eyre's assets is made based upon the ownership
percentages  of NeoStem  and EET,  and upon an initial  public  offering of Erye
which raises at least $7,300,000 (RMB  50,000,000),  Merger Sub will be entitled
to receive  the return of such  additional  paid-in  capital.  CBC will  receive
$300,000 from the  settlement  proceeds from the settlement of the litigation in
Hong Kong and Canada by RACP  Pharmaceutical  Holdings  Limited,  a wholly-owned
subsidiary of CBC,  against Li Xiaobo and certain other defendants in connection
with the  acquisition  of shares of Enshi (the "LXB  Litigation")  and use it as
working capital.

NOTE 18 - SUBSEQUENT EVENT

On April 9 and April 29,  2009,  the  Company  paid bank  loans off in the total
amount of $1,465,000.  The pledged fixed assets were in the process of releasing
by the banks.

                                      -23-

--------------------------------------------------------------------------------
<PAGE>

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

The following  discussion and analysis  should be read in  conjunction  with the
consolidated  financial  statements  and related  notes  thereto.  The following
discussion  contains   forward-looking   statements.   China  Biopharmaceuticals
Holdings,  Inc. is referred to herein as "we",  "our,",  "us", or "the Company".
The words or phrases "would be," "will allow," "expect to",  "intends to," "will
likely   result,"  "are  expected  to,"  "will   continue,"  "is   anticipated,"
"estimate,"  or similar  expressions  are  intended to identify  forward-looking
statements.  Such statements  include those  concerning the Merger  agreement we
signed with Neostem  Inc.,  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-Q 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. Further information on
potential  factors that could affect our business is described under the heading
"Risks  Factors"  in Part I, Item 1A of our  Annual  Report on Form 10-K for the
fiscal year ended December 31, 2008.  Readers are also urged to carefully review
and consider the various disclosures we have made in that report.

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.

As  reported  on our  Current  Report on Form 8-K dated  November  6,  2008,  On
November 2, 2008,  we entered into an Agreement  and Plan of Merger (the "Merger
Agreement")  with  NeoStem,  Inc.,  a Delaware  corporation  ("NeoStem"),  China
Biopharmaceuticals   Corp.,  a  British  Virgin  Islands   corporation  and  our
wholly-owned  subsidiary  ("CBC"),  and CBH Acquisition  LLC, a Delaware limited
liability  company and  wholly-owned  subsidiary of NeoStem  ("Merger Sub"). The
Merger  Agreement  contemplates our merger with and into Merger Sub, with Merger
Sub  as the  surviving  entity  (the  "Merger");  provided,  that  prior  to the
consummation of the Merger,  we will spin off all of our shares of capital stock
of CBC to our  stockholders  in a  liquidating  distribution  so that  the  only
material assets of us following such spin-off will be our 51% ownership interest
in Suzhou Erye  Pharmaceuticals  Company Ltd.  ("Erye"),  a  Sino-foreign  joint
venture with limited liability organized under the laws of the People's Republic
of China  (the  "PRC"),  plus net cash  which  shall not be less than  $550,000.
Pursuant  to the terms and  subject  to the  conditions  set forth in the Merger
Agreement,  all of our shares of common  stock,  par value $.01 per share  ("CBH
Common Stock"),  issued and outstanding  immediately prior to the effective time
of the  Merger  (the  "Effective  Time")  will be  converted  into the  right to
receive, in the aggregate, 7,500,000 shares of common stock, par value $.001 per
share,  of NeoStem (the "NeoStem Common Stock") (of which 150,000 shares will be
held in escrow  pursuant to the terms of an escrow  agreement to be entered into
between CBH and NeoStem). Subject to the cancellation of outstanding warrants to
purchase  shares of CBH  Common  Stock held by RimAsia  Capital  Partners,  L.P.
("RimAsia"),  a current holder of approximately 14% of the outstanding shares of
NeoStem  Common  Stock and the sole  holder  of  shares of Series B  Convertible
Preferred  Stock, par value $0.01 per share, of CBH (the "CBH Series B Preferred
Stock"),  all  of  the  shares  of CBH  Series  B  Preferred  Stock  issued  and
outstanding  immediately  prior to the Effective Time will be converted into (i)
5,383,009  shares of NeoStem  Common Stock,  (ii)  6,977,512  shares of Series C
Convertible  Preferred  Stock,  without  par  value,  of  NeoStem,  each  with a
liquidation  preference  of  $1.125  per share and  convertible  into  shares of
NeoStem Common Stock at a conversion price of $.90 per share, and (iii) warrants
to purchase  2,400,000  shares of NeoStem  Common Stock at an exercise  price of
$0.80 per share. At the Effective  Time, in exchange for  cancellation of all of
the outstanding  shares of CBH Series A Convertible  Preferred  Stock, par value
$.01 per share,  of CBH (the "CBH  Series A  Preferred  Stock")  held by Stephen
Globus,  a director of CBH,  and/or related  persons,  NeoStem will issue to Mr.
Globus and/or  related  persons an aggregate of 50,000 shares of NeoStem  Common
Stock.  NeoStem  also will issue  60,000  shares of NeoStem  Common Stock to Mr.
Globus and 40,000  shares of NeoStem  Common  Stock to Chris Peng Mao, the Chief
Executive  Officer of CBH, in exchange for the cancellation and the satisfaction
in full of indebtedness in the aggregate  principal amount of $90,000,  plus any
and all accrued but unpaid  interest  thereon,  and other  obligations of CBH to
Globus  and Mao.  NeoStem  will  bear 50% of up to  $450,000  of CBH's  expenses
post-merger,  and satisfaction of the liabilities of Messrs. Globus and Mao will
count toward that  obligation.  NeoStem also will issue 200,000 shares to CBC to
be held in escrow,  payable if NeoStem  successfully  consummates its previously
announced  acquisition of control of Shandong New Medicine Research Institute of
Integrated Traditional and Western Medicine Limited Liability Company.

                                       -24-

<PAGE>

Also at the Effective  Time,  subject to acceptance by the holders of all of the
outstanding warrants to purchase shares of CBH Common Stock (other than warrants
held by RimAsia),  such warrants shall be canceled and the holders thereof shall
receive  warrants to purchase up to an aggregate  of up to  2,012,097  shares of
NeoStem Common Stock at an exercise price of $2.50 per share.

The  transactions  contemplated  by the  Merger  Agreement  are  subject  to the
authorization  for listing on the  American  Stock  Exchange (or any other stock
exchange on which shares of NeoStem Common Stock are listed) of the shares to be
issued  in  connection  with  the  Merger,  shareholder  approval,  approval  of
NeoStem's  acquisition  of 51%  ownership  interest  in  Erye  by  relevant  PRC
governmental  authorities,  receipt of a fairness  opinion  and other  customary
closing conditions set forth in the Merger Agreement. If the necessary approvals
for the Merger are not obtained and the Merger is not consummated,  we will fail
to comply with our agreement with RimAsia which may cause irreparable  damage to
our business and operations.

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

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

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

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

ACCOUNTS RECEIVABLE

Accounts receivable are carried at original invoice amount less an estimate made
for  doubtful  receivables  based on a review of all  outstanding  amounts  on a
monthly  basis.  Management  judgment and estimates are made in connection  with
establishing the allowance for doubtful accounts.  Specifically,  we analyze the
aging  of  accounts  receivable   balances,   historical  bad  debts,   customer
concentrations, customer credit-worthiness,  current economic trends and changes
in our customer payment terms.  Significant changes in customer concentration or
payment  terms,  deterioration  of customer  credit-worthiness  or  weakening in
economic  trends  could  have a  significant  impact  on the  collectibility  of
receivables  and  our  operating  results.  If the  financial  condition  of our
customers  were to  deteriorate,  resulting in an impairment of their ability to
make payments, additional allowances may be required. The ultimate collection of
the  Company's  accounts  receivables  may take  over  one year and the  Company
reserved  bad debt  expense for  accounts  receivables  outstanding  more than 6
month.  The reserve for bad debts  increased to $1, 280,099 as of March 31, 2009
from  $1,200,983 as of December 31, 2008.  This increase is mainly resulted from
additional  allowance reserved for accounts  receivable balance  outstanding for
over six months,  and change in the exchange rate of RMB to USD. As of March 31,
2009, accounts receivable,  net of allowance for doubtful accounts,  amounted to
$2,916,364.

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

      Allowance for doubtful accounts

      As of December 31, 2008                                  $ 1,200,983
      Current period bad debt allowance                            126,538
      Written-off                                                   (1,189)
      Foreign currency translation adjustment                      (46,233)
                                                               -----------
      As of March 31, 2009 (unaudited)                         $ 1,280,099
                                                               ===========

                                       -25-

<PAGE>

The following list the aging of our accounts receivable excluding bad debt
allowance, as of March 31, 2009:

<TABLE>
<CAPTION>
                 3 months         6 months       9 months    Over 9 months    Over 1 year
  Total       Amount       %    Amount    %    Amount    %   Amount     %    Amount     %
----------   ----------------   ------------   -----------   -------------   --------------
<C>          <C>         <C>    <C>      <C>     <C>    <C>    <C>     <C>   <C>       <C>
$4,196,463   3,187,942   76.0   17,692   0.4     --     --     --      --    990,829   23.6
</TABLE>

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

INCOME TAX

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

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS  107,  Disclosures  About  Fair  Value of  Financial  Instruments,  defines
financial  instruments  and requires fair value  disclosures of those  financial
instruments. SFAS 157, Fair Value Measurements, adopted January 1, 2008, defines
fair value,  establishes a three-level  valuation  hierarchy for  disclosures of
fair value  measurement  and enhances  disclosures  requirements  for fair value
measures. The carrying amounts reported in the accompanying consolidated balance
sheets for  receivables,  payables  and short term  loans  qualify as  financial
instruments are a reasonable  estimate of fair value because of the short period
of time between the origination of such instruments,  their expected realization
and, if applicable, the stated rate of interest is equivalent to rates currently
available. The three levels of valuation hierarchy are defined as follows:

      o     Level 1  inputs  to the  valuation  methodology  are  quoted  prices
            (unadjusted) for identical assets or liabilities in active markets.

      o     Level 2 inputs to the valuation  methodology  include  quoted prices
            for similar  assets and  liabilities in active  markets,  and inputs
            that are observable for the assets or liability,  either directly or
            indirectly,  for  substantially  the  full  term  of  the  financial
            instruments.

      o     Level 3 inputs to the valuation  methodology  are  unobservable  and
            significant to the fair value.

Effective January 1, 2009, the Company adopted the provisions of Emerging Issues
Task Force  ("EITF")  07-5,  "Determining  Whether an  Instrument  (or  Embedded
Feature) is Indexed to an Entity's Own Stock" ("EITF 07-5"),  which is effective
for financial  statements for fiscal years beginning after December 15, 2008 and
which replaced the previous guidance on this topic in EITF 01-6. Paragraph 11(a)
of FAS 133 specifies that a contract that would otherwise meet the definition of
a  derivative  but is both  (a)  indexed  to the  Company's  own  stock  and (b)
classified in stockholders'  equity in the statement of financial position would
not be considered a derivative  financial  instrument.  EITF 07-5 provides a new
two-step model to be applied in determining whether a financial instrument or an
embedded  feature is indexed to an  issuer's  own stock and thus able to qualify
for the FAS 133 paragraph 11(a) scope exception.

As a result of  adopting  EITF 07-5,  19,831,684  of our issued and  outstanding
warrants  previously  treated as equity  pursuant  to the  derivative  treatment
exemption were no longer afforded equity  treatment  because the strike price of
the warrants is  denominated  in US dollar,  a currency other than the Company's
functional  currency,  the Chinese Renminbi.  As a result,  the warrants are not
considered  indexed to the Company's own stock,  and as such, all future changes
in the fair value of these  warrants  will be  recognized  currently in earnings
until such time as the warrants are exercised or expired.

NONCONTROLLING INTERESTS

Effective  January  1,  2009,  the  Company  adopted  SFAS 160,  "Noncontrolling
Interests in  Consolidated  Financial  Statements  - an amendment of  Accounting
Research Bulletin No. 51" ("SFAS 160"). Certain provisions of this statement are
required  to  be  adopted  retrospectively  for  all  periods  presented.   Such
provisions  include a  requirement  that the  carrying  value of  noncontrolling
interests  (previously  referred to as minority  interests)  be removed from the
mezzanine section of the balance sheet and reclassified as equity.

                                       -26-

<PAGE>

Further,  as a result  of  adoption  on SFAS 160,  net  income  attributable  to
noncontrolling  interests is now excluded from the determination of consolidated
net income. In addition,  foreign currency  translation  adjustment is allocated
between controlling and noncontrolling interests.

NEW ACCOUNTING PRONOUNCEMENTS

In March  2008,  the FASB  issued SFAS No.  161,  Disclosures  about  Derivative
Instruments and Hedging  Activities - An Amendment of SFAS No. 133 ("SFAS 161").
SFAS 161 seeks to improve  financial  reporting for derivative  instruments  and
hedging  activities by requiring  enhanced  disclosures  regarding the impact on
financial  position,  financial  performance,  and cash flows.  To achieve  this
increased  transparency,  SFAS 161 requires (1) the disclosure of the fair value
of  derivative  instruments  and gains and losses in a tabular  format;  (2) the
disclosure  of  derivative  features  that  are  credit  risk-related;  and  (3)
cross-referencing within the footnotes.  SFAS 161 became effective on January 1,
2009 and has no impact of the Company's financial statements.

In May 2008,  the FASB issued SFAS 162,  "The  Hierarchy of  Generally  Accepted
Accounting  Principles".  FAS 162 is intended to improve financial  reporting by
identifying  a consistent  framework,  or hierarchy,  for  selecting  accounting
principles to be used in preparing  financial  statements  that are presented in
conformity with U.S. GAAP for nongovernmental entities. SFAS 162 is effective 60
days  following the SEC's approval of the Public  Company  Accounting  Oversight
Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity
with Generally  Accepted  Accounting  Principles." SFAS 162 has no impact on the
company's financial statements.

In June 2008, FASB issued EITF 08-4,  Transition Guidance for Conforming Changes
to Issue No.  98-5  ("EITF  08-4").  The  objective  of EITF 08-4 is to  provide
transition  guidance for  conforming  changes made to EITF 98-5,  Accounting for
Convertible  Securities  with  Beneficial  Conversion  Features or  Contingently
Adjustable  Conversion Ratios, that result from EITF 00-27 "Application of Issue
No.  98-5 to Certain  Convertible  Instruments",  and SFAS 150,  Accounting  for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity. This Issue is effective for financial statements issued for fiscal years
ending after December 15, 2008. Early application is permitted. EITF 08-4 has no
impact of the Company's financial statement..

On  October  10,  2008,  the FASB  issued  FASB  Staff  Position  ("FSP").157-3,
Determining  the Fair Value of a Financial  Asset When the Market for That Asset
Is Not Active,  which  clarifies the application of SFAS 157 in a market that is
not  active  and  provides  an  example  to  illustrate  key  considerations  in
determining  the fair  value of a  financial  asset  when  the  market  for that
financial asset is not active.  FSP 157-3 became  effective on October 10, 2008,
and its  adoption  did not have a  material  impact on the  Company's  financial
position or results for the quarter ended March 31, 2009.

In January 2009, the FASB issued FSP EITF 99-20-1, "Amendments to the Impairment
Guidance of EITF Issue No. 99-20, "Recognition of Interest Income and Impairment
on Purchased and Retained Beneficial Interests in Securitized Financial Assets".
FSP EITF 99-20-1  changes the impairment  model included within EITF 99-20 to be
more consistent with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves
this by  amending  the  impairment  model in EITF 99-20 to remove its  exclusive
reliance  on  "market  participant"  estimates  of  future  cash  flows  used in
determining   fair   value.   Changing   the   cash   flows   used  to   analyze
other-than-temporary impairment from the "market participant" view to a holder's
estimate of whether there has been a "probable" adverse change in estimated cash
flows allows  companies  to apply  reasonable  judgment in assessing  whether an
other-than-temporary  impairment has occurred.  The adoption of FSP EITF 99-20-1
did not have a material impact on our consolidated  financial statements.

In April 2009, the FASB issued FSP FAS 157-4,  "Determining  Fair Value When the
Volume  and Level of  Activity  for the Asset or  Liability  Have  Significantly
Decreased and  Identifying  Transactions  That Are Not  Orderly".  FSP FAS 157-4
amends SFAS 157 and provides  additional  guidance for estimating  fair value in
accordance  with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased and also includes guidance on identifying
circumstances  that  indicate  a  transaction  is not  orderly  for  fair  value
measurements.  This  FSP  shall  be  applied  prospectively  with  retrospective
application  not  permitted.  This FSP shall be effective for interim and annual
periods ending after June 15, 2009,  with early  adoption  permitted for periods
ending after March 15, 2009.  An entity early  adopting this FSP must also early
adopt  FSP  FAS  115-2  and  FAS  124-2,   "Recognition   and   Presentation  of
Other-Than-Temporary  Impairments".  Additionally,  if an entity elects to early
adopt either FSP FAS 107-1 and APB 28-1,  "Interim  Disclosures about Fair Value
of Financial  Instruments" or FSP FAS 115-2 and FAS 124-2, it must also elect to
early  adopt  this  FSP.  We are  currently  evaluating  this new FSP but do not
believe that it will have a significant impact on the determination or reporting
of our financial results.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2. This FSP amends SFAS
115,  "Accounting for Certain  Investments in Debt and Equity  Securities," SFAS
124, "Accounting for Certain Investments Held by Not-for-Profit  Organizations,"
and EITF 99-20,  "Recognition  of Interest  Income and  Impairment  on Purchased
Beneficial  Interests  and  Beneficial  Interests  That Continue to Be Held by a
Transferor in Securitized  Financial  Assets," to make the  other-than-temporary
impairments  guidance  more  operational  and to  improve  the  presentation  of
other-than-temporary  impairments  in the  financial  statements.  This FSP will
replace the existing requirement that the entity's management assert it has both
the intent and ability to hold an impaired debt security  until  recovery with a
requirement  that  management  assert  it does not have the  intent  to sell the
security,  and it is more likely than not it will not have to sell the  security
before recovery of its cost basis. This FSP provides increased  disclosure about
the credit and noncredit  components of impaired  debt  securities  that are not
expected to be sold and also

                                       -27-

<PAGE>

requires increased and more frequent disclosures  regarding expected cash flows,
credit losses, and an aging of securities with unrealized losses.  Although this
FSP does not result in a change in the carrying  amount of debt  securities,  it
does require that the portion of an other-than-temporary  impairment not related
to a credit loss for a held-to-maturity security be recognized in a new category
of other  comprehensive  income and be amortized  over the remaining life of the
debt  security as an increase in the carrying  value of the  security.  This FSP
shall be effective  for interim and annual  periods  ending after June 15, 2009,
with early adoption permitted for periods ending after March 15, 2009. An entity
may early  adopt this FSP only if it also  elects to early  adopt FSP FAS 157-4.
Also,  if an entity  elects to early adopt either FSP FAS 157-4 or FSP FAS 107-1
and APB 28-1,  the entity  also is  required  to early  adopt  this FSP.  We are
currently  evaluating  this  new FSP  but do not  believe  that  it will  have a
significant impact on the determination or reporting of our financial results.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1.  This FSP amends SFAS
107 to  require  disclosures  about  fair  value of  financial  instruments  not
measured on the balance sheet at fair value in interim  financial  statements as
well as in annual financial statements. Prior to this FSP, fair values for these
assets and  liabilities  were only disclosed  annually.  This FSP applies to all
financial  instruments within the scope of SFAS 107 and requires all entities to
disclose the method(s)  and  significant  assumptions  used to estimate the fair
value of financial instruments.  This FSP shall be effective for interim periods
ending after June 15, 2009,  with early  adoption  permitted for periods  ending
after March 15, 2009.  An entity may early adopt this FSP only if it also elects
to early adopt FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2.  This FSP does not
require  disclosures for earlier periods  presented for comparative  purposes at
initial  adoption.  In  periods  after  initial  adoption,   this  FSP  requires
comparative  disclosures only for periods ending after initial adoption.  We are
currently evaluating the disclosure requirements of this new FSP.

                                       -28-

<PAGE>

RESULTS OF  OPERATIONS  - THREE MONTHS ENDED MARCH 31, 2009 AS COMPARED TO THREE
MONTHS ENDED MARCH 31, 2008

REVENUE

Revenue for the three  months  ended March 31,  2009 was  $12,648,007  while the
revenue for the three months ended March 31, 2008 was $10,973,241,  representing
an  approximately  15.3%  increase.  The  increase is mainly  attributed  by the
increase of prescription drugs, which has increased 44.7% compared with the same
period of 2008. The Company has improved its sales  structure,  and expanded the
market of products with profits with higher gross profit and sales  volume.  The
sales of the major products have  increased  55.7% compared with the same period
of 2008.  Taking  advantage  of the  governmental  new  policy,  especially  the
provincial online purchase system, the Company has made significant  progress in
expanding the sales  market.  Sales volume has leaped in pace with the deepening
of the reform of medical insurance system in rural areas of China. More than 60%
drug  categories  of the  Company  have  been  allowed  to enter  the New  Rural
Cooperative Medical Insurance System,  through which the Company realized stable
growth.

COST OF GOODS SOLD

Cost of goods sold for the three months ended March 31, 2009 was  $8,601,218  as
compared to $7,711,162 for the three months ended March 31, 2008.  Cost of goods
sold as a percentage  of sales  revenues was  approximately  68.0% for the three
months ended March 31, 2008 compared to approximately 70.3% for the three months
ended  March 31,  2008.  The  increase  in cost of goods sold in terms of dollar
amount is accompanying with the increase of sales.

GROSS PROFIT

Gross profit in the three months ended March 31, 2009 amounted to $4,046,789, as
compared to $3,262,079  for the three months ended March 31, 2008,  representing
approximately 24.1% increase. The gross profit margin for the three months ended
March 31, 2009 was 32.0%  compared to  approximately  29.7% for the three months
ended March 31, 2008. The increase is attributed  primarily by selling  products
of higher gross margin instead of the ones with lower gross margin, the sales of
powders for injection  (Cephems) and of Penicillin  still plays a dominant role.
The sales  volume has  increased  24.8%  compared  with the same period of 2008,
which has lower the fixed  cost per  product  unit and the entire  product  cost
decreased and improved the profit margin as a result.

OPERATING EXPENSES

Operating  expenses for the three months ended March 31, 2009 was  $1,427,470 as
compared  to $1,092,744 for the  three  months  ended  March  31,  2008,
representing 30.6% increase.  The increase of operation expenses is accompanying
with the increase of sales. Especially,  selling expense increased significantly
for three  months  ended March 31, 2009  compared  with the same period of 2008,
among  which the  travel  expense  increased  107.0%  and meals &  entertainment
expense increased 55.3%, which were related to visiting customers in wider sales
markets more  frequently as well as advertising  costs  increased  185.5% due to
tighter market competition.  The Company also incurred bad debt expense amounted
to $82,000 in the three months ended March 31, 2009.

RESEARCH AND DEVELOPMENT

Research  and  development  costs for the three months ended March 31, 2009 were
$13,933 as compared to $17,947 for the three months  ended March 31, 2008.  This
decrease was primarily  attributed by R&D expense of Erye.  Erye kept working on
its research  and  development  projects  and one major  project has reached the
clinical  trial  stage as of  March  31,  2009.  As a result  the  research  and
development expenses associated with such projects decreased.

INCOME FROM OPERATIONS

Income from  operations  in the three  months  ended March 31, 2009  amounted to
$2,619,319, as compared to $2,169,335 for the three months ended March 31, 2008,
representing  approximately 20.7% increase.  The increase is mainly attributable
by Erye's strong performance in sales revenue.

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

Net income available to common shareholders for the three months ended March 31,
2009 was  $975,515  compared to $492,076  for the three  months  ended March 31,
2008,  representing 98.2% increase. The net income increase is mainly attributed
by  sales  increase  and  gross  profit  rate  improved  through  Erye's  strong
performance  for the three months ended March 31, 2009. The Company has improved
its sales structure,  reorganized their sales teams and sales direction based on
the National Medical Reform Proposal, the Company also integrated its customer's
resource  and  purchasing  power,  which are the main  factors  to  achieve  the
significant progress in sales.

                                      -29-

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2009,  total current assets were  $21,930,414  and total current
liabilities  were  $19,575,964.  Cash and cash equivalents on March 31, 2009 was
$2,226,777,  an increase of $1,645,050  from the $581,727  reported on March 31,
2008. The increase is mainly attributed through the increase in sales revenue.

For the three  months  ended March 31,  2009,  net cash  provided by  continuing
operating  activities  was  $1,931,350.  Cash  provided by operating  activities
results  primarily  from the Erye's strong  performance in sales and increase in
its profit margin. Erye has paid $3,593,607 more for its inventories in order to
produce sufficient products for the busy sales season started in next quarter.

Net cash provided by investing  activities and used in financing activities were
$1,412,177  and  $1,696,921,  respectively,  for the three month ended March 31,
2009.  Cash  provided  by  investing  activities  during  the  period was mainly
contributed by the withdrawal  $4,384,553 from the short-term investment account
of Erye. The Company also used $1,108,537 for the construction of the new plant,
and  purchase of  equipments.  During the  quarter,  Net cash used in  financing
activities was mainly due to Erye repayment of $1,172,080  short-term bank loans
back.

Relocation of Erye

The  new  plant  of Erye is  currently  under  construction.  To  date,  all the
buildings in the  manufacturing  area have been completed,  and the Purification
plant is under  construction and the equipments are delivered and in the process
of  assembling.  The Company  expects that the  Penicillin  and Cephems  sterile
injection  powder workshops will be completed by the end of 2009. In early 2010,
the  company  plans  to  apply  for  GMP  approval  with  China  Food  and  Drug
Administration (SFDA) for these two workshops.

The total  expenditure of the new factory  project and the relocation of Erye is
estimated up to $29,340,000 (RMB200,000,000), of which $7,539,511 has been spent
to date.

OUTLOOK

Our Company  has entered  into a Merger  Agreement  with  Neostem and expects to
complete the Merger on the second or third  quarter of 2009,  subject to receipt
of all necessary approvals.

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. If the Merger is not consummated,  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. As of March 31, 2009,
the value of the Renminbi to the U.S. dollar was translated at 6.83 RMB to $1.00
USD.

                                      -30-

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4T. CONTROLS AND PROCEDURES

Disclosure  Controls and  Procedures.  As of March 31,  2009,  we carried out an
evaluation,  under the supervision and with the participation of our management,
including our chief executive  officer and our chief financial  officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures.  Based on the  foregoing,  our  chief  executive  officer  and chief
financial  officer  concluded  that our  disclosure  controls and procedures (as
defined in Rules  13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of
1934) were not effective.

During our assessment of the  effectiveness  of internal  control over financial
reporting  as of  December  31,  2008,  our  management  identified  significant
deficiencies related to the following:

1. Insufficient U.S.GAAP qualified accounting and finance personnel.

As U.S. GAAP closing process relates to non-routine  transactions and estimates,
we didn't have sufficient and skilled accounting and finance personnel necessary
to close our books under  U.S.GAAP at our  subsidiaries  in China because of the
differences  between  two  accounting  policies,  and on  the  other  hand,  the
accounting  person  aren't  familiar  with  U.S.GAAP and lack of training.  This
material  weakness resulted in adjustments to several  significant  accounts and
disclosures and contributed to other material weakness described above.

2. Lack of Internal Audit System.

The Company does not have the internal audit  department,  which was ineffective
in  preventing  and  detecting  control  lapses and errors in the  accounting of
certain key areas like revenue  recognition,  purchase approvals,  inter-company
transactions,  cash  receipt  and cash  disbursement  authorizations,  inventory
safeguard and proper  accumulation for cost of products,  in accordance with the
appropriate costing method used by the Company.

3. Financial Statement closing process.

We found that  controls over the financial  statement  close process  related to
account reconciliation and analyses, including bank accounts, certain long-lived
assets and accrued liabilities,  were not effective. As a result, a large volume
of adjustments were necessary to completely and accurately present the financial
statements  close process to the preparation of reliable  financial  statements,
there is reasonable  possibility that a material misstatement of the interim and
annual  financial  statements  would not have been  prevented  or  detected on a
timely basis.

As  disclosed  in our  Management's  Annual  Report  on  Internal  Control  over
Financial  Reporting filed with the 2008 Form 10K, the Company's  management has
identified  the steps  necessary  to address the material  weaknesses  described
above and we are in the process to have the remediation procedures implemented.

Changes in Internal Control over Financial Reporting.  During the fiscal quarter
ended  March 31,  2009,  there have been no changes  in the  Company's  internal
control over financial  reporting,  identified in connection with our evaluation
thereof,  that have materially affected,  or are reasonably likely to materially
affect, its internal control over financial reporting.

We are continuing to build our account  resources in response to the weaknesses.
While we continue to develop and implement new control  processes and procedures
to address these  weaknesses,  we have determined that further  improvements are
required  in our  accounting  processes  before  we can  consider  the  material
weakness remediated.


                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

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

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

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

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

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

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

* Filed herewith
** Furnished herewith

                                      -31-

<PAGE>

                                   SIGNATURES

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

                     CHINA BIOPHARMACEUTICALS HOLDINGS, INC.

                           By: /s/ Chris Peng Mao
                           -------------------------------------------
                           Name:  Chris Peng Mao
                           Title: Chief Executive Officer
                           Date: May 15, 2009

                           By: /s/ ZHANG Jian
                           -------------------------------------------
                           Name: ZHANG Jian
                           Title: Chief Financial Officer
                           Date: May 15, 2009

                                      -32-