**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**Form
      10-KSB**


(Mark
      One)





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





FOR
      THE
      FISCAL YEAR ENDED ***DECEMBER
      31, 2007***





o
      TRANSITION REPORT UNDER
      SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





FOR
      THE
      TRANSITION PERIOD FROM __________ TO __________


COMMISSION
      FILE NUMBER ________________________________





**China
      Holdings, Inc.**


(Name
      of
      Small Business Issuer in Its Charter)




**Nevada**
              (State
                or other jurisdiction of incorporation or organization)
            **98-0432681**
              (I.R.S.
                Employer identification No.)





**Julianna
      Lu, BSc. MSc.**


**Chief
      Executive Officer**


**101
      Convention Center Drive, Suite 700, Las Vegas, NV
      89109-2001**


(Address
      of principal executive offices) (Zip Code)


Issuer’s
      telephone Number: **86-10-6586-4770**





**Mailing
      Address**


**8E-C2,
      Global Trade Mansion, No.9A, GuangHua Rod,**


**Chaovan
      District, Beijing PR China 100020**


Issuer’s
      telephone Number: **86-10-6586-4770** and
      Facsimile **:
      86-10-6586-4790**





**China
      Health Holding, Inc.**


(Former
      name, former address and former fiscal year,


if
      changed since last report)


Copies
        to
 Gregg
        E.
        Jaclin, Esq.


Anslow
      & Jaclin, LLP


195
      Route
      9 South, Suite 204


Manalapan,
      NJ 07726


t:
      (732)
      409-1212


f:
      (732)
      577-1188




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





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
o
      No x





State
      issuer’s revenues for its most recent fiscal year. $0





The
      aggregate market value of the issued and outstanding common stock held by
      non-affiliates of China Holdings, Inc. based upon the closing price of the
      Common Stock as quoted on the Over the Counter Bulleting Board (OTCBB) on March
      31, 2008, was approximately $2,586,090.





As
      of
      March 31, 2008, the issuer had a total of 185,007,060 outstanding shares of
      Common Stock and 1,250,000 shares of Series “A” Preferred Stock.





Transitional
      Small Business Disclosure Format (check one): Yes o No x









**TABLE
      OF CONTENTS**





**Page****PART
                I**Item
                1. Description of Business
            
            
            4Item
                2. Description of Property
            
            
            13Item
                3. Legal Proceedings
            
            
            13Item
                4. Submission of Matters to a Vote of Security Holders
            
            
            13**PART
                II**Item
                5. Market for Common Equity and Related Stockholder
                Matters
            
            
            14Item
                6. Management’s Discussion and Analysis or Plan of
                Operation
            
            
            20Item
                7. Financial Statements
            
            
            36Item
                8. Changes In and Disagreements with Accountants on Accounting and
                Financial Disclosure
            
            
            36Item
                8A. Controls and Procedures
            
            
            36Item
                8B. Other Information
            
            
            38**PART
                III**Item
                  9. Directors,
                  Executive Officers, Promoters and Control Persons; Compliance With
                  Section
                  16(a) of the Exchange Act
            
            
            38Item
                10. Executive Compensation
            
            
            40Item
                11. Security Ownership of Certain Beneficial Owners and
                Management
            
            
            42Item
                12. Certain Relationship and Related Transactions
            
            
            42Item
                13. Exhibits
            
            
            43Item
                14. Principal Accountant Fees and Services
            
            
            47**SIGNATURES**
            
            
            48





2




**Forward
      Looking Statement  -**




This
      annual report contains certain forward-looking statements within the meaning
      of
      Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
      Securities Exchange Act of 1934, as amended. These include statements about
      our
      expectations, beliefs, intentions or strategies for the future, which we
      indicate by words or phrases such as "anticipate," "expect," "intend," "plan,"
      "will," "we believe," "our company believes," "management believes" and similar
      language. These forward-looking statements are based on our current expectations
      and are subject to certain risks, uncertainties and assumptions, including
      those
      set forth in the discussion under Item 1. Description of Business" and Item
      6.
      "Management's Discussion and Analysis", including under the heading "- Risk
      Factors" under Item 6. Our actual results may differ materially from results
      anticipated in these forward-looking statements. We base our forward-looking
      statements on information currently available to us, and we assume no obligation
      to update them. In addition, our historical financial performance is not
      necessarily indicative of the results that may be expected in the future and
      we
      believe that such comparisons cannot be relied upon as indicators of future
      performance.





To
      the
      extent that statements in the annual report is not strictly historical,
      including statements as to revenue projections, business strategy, outlook,
      objectives, future milestones, plans, intentions, goals, future financial
      conditions, future collaboration agreements, the success of the Company's
      development, events conditioned on stockholder or other approval, or otherwise
      as to future events, such statements are forward-looking, All forward-looking
      statements, whether written or oral, and whether made by or on behalf of the
      company, are expressly qualified by the cautionary statements and any other
      cautionary statements which may accompany the forward-looking statements, and
      are made pursuant to the safe harbor provisions of the Private Securities
      Litigation Reform Act of 1995. The forward-looking statements contained in
      this
      annual report are subject to certain risks and uncertainties that could cause
      actual results to differ materially from the statements made. Other important
      factors that could cause actual results to differ materially include the
      following: business conditions and the amount of growth in the Company's
      industry and general economy; competitive factors; ability to attract and retain
      personnel; the price of the Company's stock; and the risk factors set forth
      from
      time to time in the Company's SEC reports, including but not limited to its
      annual report on Form 10-KSB; its quarterly reports on Forms 10-QSB; and any
      reports on Form 8-K. In addition, the Company disclaims any obligation to update
      or correct any forward-looking statements in all the Company’s annual reports
      and SEC filings to reflect events or circumstances after the date
      hereof.





*As
      used in this Annual Report, unless otherwise indicated, the terms “we,” “us,”
“our” and “the Company” refer to China Holdings, Inc. and its
      subsidiaries.*




3





**PART
      I**





**Item
      1. Description of Business**





We
      are a
      development stage company, founded by our Chairman and Chief Executive Officer,
      Julianna Lu, in 2002 with the goal of becoming a leading manufacturer, marketer
      and distributor in the global natural medical and pharmaceutical industry.
      On
      April 3, 2002, we were incorporated under the laws of the State of Nevada under
      the name A E&E Pharma Corporation and changed our name on May 25, 2004, to
      China Health Holding, Inc. On May 1, 2007, we changed our name to China
      Holdings, Inc. Effective May 11, 2007, our stock trades under the symbol CHHL
      on
      the OTC Bulletin Board. The Company maintains a website at www.chinaholding.net .
      We have
      had nominal revenues since our inception.


Our
      initial business plan was to engage in the manufacturing, marketing and
      distribution of proprietary natural medicinal products. We have since revised
      our business plan to not only focus on the manufacture, marketing and
      distribution of natural medicinal products but to also focus on becoming a
      diversified global assets holding company. We intend to engage in multiple
      China-focused business activities including, energy, renewable energy,
      resources, utilities finance, real estate, and pharmaceutical. Our
      objective is to achieve long-term capital appreciation through investment in
      companies and other entities with significant assets, investments, production
      activities, trading or other business interests in China, or/and worldwide,
      or/and which derive a significant part of their revenue from China, or/and
      worldwide.





***Subsidiaries***




In
      April
      2005, we formed two wholly owned subsidiaries in the State of Nevada: (1) China
      Health World Pharmaceutical Corporation; and (2) China Health World Trade
      Corporation. Our subsidiaries were formed to assist and support us with global
      development, manufacturing, commercialization, marketing, and distribution
      of
      our natural herbal products worldwide, in North America, in PR China and in
      Europe.





On
      May 1,
      2007, our wholly owned subsidiary, China Health World Pharmaceutical
      Corporation, amended its Articles of Incorporation to change its name to China
      Health Holdings, Inc and on May 9, 2007, our wholly owned subsidiary China
      Health World Trade Corporation amended its Articles of Incorporation to change
      its name to China Power, Inc.





On
      January 7, 2008, the Company formed another wholly owned subsidiary: China
      Minerals Holdings, Inc. in the State of Nevada.




***China
      Power, Inc.***





China
      Power, Inc. (“China Power”) is a development stage company with the goal of
      becoming a leading energy and renewable energy holding company that focuses
      on
      mergers and acquisitions, investment, research and development, construction
      and
      the operation of energy, and renewable energy, and environmental protection
      projects in China and throughout the world. China Power is attempting to develop
      renewable energy projects, pipelines in biomass energy projects and hydropower
      plants though mergers and acquisitions, joint-venture partnerships with biomass
      projects and hydropower plants, companies, local governments in China and
      throughout the world. China Power’s renewable energy strategy and plan in
      hydropower plants and biomass energy projects will enhance the technical,
      social, and environmental benefits of biomass energy and hydropower projects
      and
      provide investment and business opportunities in the cost-competitive industries
      or biomass energy and hydropower capacity energy supply in China and throughout
      the world, and also help increase long term shareholder value.





***China
      Minerals Holdings, Inc.***





China
      Mineral Holdings, Inc. (“China Mineral Holdings”) is a development stage mining
      company with the aim of establishing, expanding, and diversifying it presence
      in
      the mining resource industry in China and throughout the world, in its precious
      and rare metals resource and properties by securing mining licenses for
      production and through strong joint venture partners in China.  China
      Mineral Holdings intends to establish the production of high-margin rare metals
      (Vanadium (V2O5), Molybdenum (Mo), Uranium (U)) and to increase its mineral
      resource inventory and mining life though exploration, production and the
      development of multi-commodity project pipe lines. Furthermore, China
      Mineral Holdings’ mining projects and prospects will be based on rigorous
      economic evaluation and will subsequently be advanced though
      joint-ventures.





***China
      Health Holdings, Inc.***





China
      Health Holdings, Inc. (“China Health”) is a development stage company with the
      goal of becoming a leading developer, manufacturer, marketer and distributor
      of
      pharmaceutical drugs and dietary supplements in China and throughout the world.
      China Health Holdings' main objective is to partner with CHINA -SFDA approved
      drug producers, GMP certified manufacturing facilities, research and development
      centers and universities in China. China Health's goals for 2008-2013 include
      the profitable penetration of the Chinese pharmaceutical industry through
      mergers and acquisitions with leading pharmaceutical companies in China.
      Specifically, China Health’s strategy is to leverage synergies, integrate drug
      pipelines and distribution channels, and management expertise between pending
      pharmaceutical acquisitions.




4




***RECENT
      DEVELOPMENTS***





The
      Company, via its wholly owned subsidiary China Power, has entered a total
      of five (5) development, investment and construction agreements with local
      China Governments to develop, invest and construct a total of  five
      (5) biomass energy power generation plants/projects with a total potential
      power
      capacity for 50MW x 5 = 250 MW in pipeline. The development and construction
      of
      the facilities will require approximately $78,000,000 for each 50MW biomass
      plant/project. The development and construction of the facilities are subject
      to
      the Company completing certain due diligence requirements and obtaining
      financing from third parties.





In
      addition to the above, the Company has entered into agreements and memorandums
      of understanding with other third parties for the development of various power
      plants. To date, the Company has not effectuated the agreements and will not
      be
      in a position to do so until it receives the substantial financing needed to
      complete these transactions.




***Future
      Development***





We
      are in
      the process of identifying merger and/or acquisitions candidates in the Peoples
      Republic of China and worldwide as part of our growth plan to secure a strong
      future. Our acquisition strategy highlights our updated growth strategy to
      accrete value to our shareholders through the strategic combination of assets
      of
      energy and renewable energy projects (such as hydropower plant and biomass
      energy projects, etc), mineral resources and natural medicinal
      products  in China and throughout the world. Growth by acquisition is
      an important component of our updated business model. As the Chinese government
      policy continues to change and move towards privatization of businesses, our
      focus on the emerging opportunities in China will primarily focus on small
      and
      medium-sized enterprises. Management believes that our growth strategy will
      enable the company to secure a strong future and a powerful position in the
      global assets holding company.




If
      we are
      successful in raising $150 million of financing in order to expand our business
      and fund future development, we anticipate the following expenses over the
      next
      twelve months: (a) $150,000 to develop our Internet website and e-commerce
      system in multi-languages; (b) $200,000 for media advertising to promote our
      brand name; (c) $200,000 for our research and development program; (d) $400,000
      for an investor relations program; (f) $500,000 for professional and consultant
      fees; (g) $1,800,000 for general working capital, including product development,
      inventory, and general and administrative expenses; and (h) $146,750,000 for
      merger and acquisitions and joint-ventures.




If
      the
      Company is only successful in raising $3 million of financing to sustain its
      current level of business operations, we anticipate the following expenses
      over
      the next twelve months: (a) $150,000 to develop its Internet website and
      e-commerce system in multi-languages; (b) $200,000 for media advertising to
      promote our brand name; (c) $200,000 for its research and development program;
      (d) $400,000 for an investor relations program; (f) $500,000 for professional
      and consultant fees; and (g) $1,800,000 for general working capital, including
      product development, inventory, and general and administrative
      expenses.





**Acquisition
      of Plant and Equipment and Other Assets**





If
      the
      Company successfully closes on acquisitions it will acquire material property,
      plant or equipment during the next 12 months. If the Company is successful
      in
      developing and construction of our biomass energy projects it will acquire
      material property, plant or equipment during the next 12 months.





**Number
      of Employees**





From
      inception through the period ended March 31, 2008, we have principally relied
      on
      the services of outside consultants and part-time employees for services. We
      currently have six (6) full time employees and 25 part-time employees. In order
      for us to attract and retain quality personnel, we anticipate we will have
      to
      offer competitive salaries to future employees. We anticipate that it may become
      desirable to add additional full and or part time employees to discharge certain
      critical functions during the next 12 months. This projected increase in
      personnel is dependent upon our ability to generate revenues and obtain sources
      of financing. There is no guarantee that we will be successful in raising the
      funds required or generating revenues sufficient to fund the projected increase
      in the number of employees. As we continue to expand, we will incur additional
      cost for personnel.





**Operations
      Plans**




China
      Holdings, Inc.’s goal is to become **** a
      diversified global assets holding company. We and our subsidiaries engage in
      multiple China-focused business activities including, energy, renewable energy,
      resources, utilities finance, real estate, and pharmaceutical. Our
      objective is to achieve long-term capital appreciation through investment in
      companies and other entities with significant assets, investments, production
      activities, trading or other business interests in China, or/and worldwide,
      or/and which derive a significant part of their revenue from China, or/and
      worldwide.




5




**China
      Power, Inc.**





China
      Power, Inc. (“China Power”) is a development stage company with the goal of
      becoming a leading energy and renewable energy holding company that focuses
      on
      mergers and acquisitions, investment, research and development, construction
      and
      the operation of energy, and renewable energy, and environmental protection
      projects in China and throughout the world. China Power is attempting to develop
      renewable energy projects, pipelines in biomass energy projects and hydropower
      plants though mergers and acquisitions, joint-venture partnerships with biomass
      projects and hydropower plants, companies, local governments in China and
      throughout the world. China Power’s renewable energy strategy and plan in
      hydropower plants and biomass energy projects will enhance the technical,
      social, and environmental benefits of biomass energy and hydropower projects
      and
      provide investment and business opportunities in the cost-competitive industries
      or biomass energy and hydropower capacity energy supply in China and throughout
      the world, and also help increase long term shareholder value.





China
      Power intends to seek financing for $150-200 millions via an Initial Public
      Offering (IPO) in 2008 to fund its hydropower and biomass energy
      projects.  Financing transactions may include the issuance of equity
      or debt securities, obtaining credit facilities, or other financing mechanisms.
      There can be no assurance that we will be successful in obtaining financing
      and
      that this line of business will be successfully developed.




Our
      objective is to achieve long-term capital appreciation through investment in
      companies and other entities with significant assets, investments, production
      activities, trading or other business interests in China and throughout the
      worldwide, or/and which derive a significant part of their revenue from China
      and throughout the world.




**Market
      Analysis**




**Biomass
      Renewable Energy in China**





Renewable
      Power Producers are involved in generating electric power from renewable energy
      sources, such as hydropower (Water), wind energy and certain waste products
      such
      as biomass. The demand for renewable energy power in the world continues to
      grow and is largely driven by long-term trends towards stronger policies for
      environmental protection. The combustion of fossil fuels, such as coal, oil
      and
      natural gas emits greenhouse gases, and is acknowledged worldwide as a major
      cause of global warming. Environmental protection policies, combined with
      an increase in demand for electricity, limited supply and near all-time high
      energy commodity prices are enticing electricity producers and providers to
      diversify their mix of power generation to include a larger share of renewable
      power.




*Biomass
      Renewable Energy: straw to energy.* Straw is
      a source renewable energy. The carbon on the inside of straw can change to
      organic carbon through absorption of carbon dioxide (CO2) from the atmosphere
      during photosynthesis. Biomass, as an alternative and renewable energy
      source, is fully supported by the central government and local governments
      of
      China. Specifically, the development and construction of renewable energy
      projects are protected by The Renewable Energy Law, created on January 1, 2006
      by the People Congress of China. The Chinese central government has set a
      series of tax exemption/deduction regulations to encourage the construction
      of
      renewable energy projects. The National Reform and Development Committee
      implement the purchase electricity price for renewable energy. It ensures
      that the standard purchase electricity price is 0.25 Yuan/kWh in addition to
      a
      local average grid connection price of 0.25-0.44 Yuan/kWh.





**Hydropower
      Industry Overview**





Renewable
      energy power producers are involved in the generation of electricity from
      renewable sources of energy including (i) water; (ii) wind; (iii) certain waste
      products, such as biomass (e.g., waste wood from forest products operations)
      and
      landfill gas; (iv) geothermal sources, such as heat or steam; and (v) the sun.
      Demand for renewable power sources in North America continues to grow and is
      largely driven by the long-term trend toward stronger policies
      for protecting the environment. The combustion of fossil fuels such as
      coal, oil, and natural gas to produce electricity emits greenhouse gases, and
      is
      acknowledged internationally as being a major contributor to global warming.
      These environmental concerns, combined with increases in electricity demand,
      low
      levels of growth in electricity supply, and near all-time high energy commodity
      prices, are enticing electricity providers to diversify their mix of power
      generation sources to include a larger share of renewable power. In the
      traditional market structure of the electricity industry, vertically-integrated
      monopoly utilities have (i) generated (production of electricity), (ii)
      transmitted (transport of electricity from generation facilities to transformer
      stations), and (iii) distributed electricity (transport from transformer
      stations to consumers). A number of factors, including rising electricity rates
      and fossil fuel prices, technological advances, and concerns about cost controls
      in funding future investments in generation and transmission have led several
      jurisdictions to restructure their electricity markets to move towards full
      competition or regulated competition. An integral part of the restructuring
      effort has been the introduction of new generation supply from third
      parties, or “independent power producers”, that are independent of government
      and differ from traditional vertically-integrated and regulated utilities.
      While
      traditional regulated utilities continue to dominate the North American
      electricity generation markets, it is recognized that independent power
      producers will play an increasingly important role in the supply of electricity
      needs in the future. In recent years, governmental authorities and other
      policymakers have increasingly recognized the benefits of power generated by
      independent power producers. The trend towards increased reliance on independent
      power producers for the supply of renewable power in North America is fuelled
      by
      a number of factors, including (i) the increase in government-sponsored
      incentives, (ii) the availability of long-term contracts for the purchase of
      renewable energy with highly creditworthy counterparties, allowing independent
      power producers to develop new projects in a low-risk environment with the
      expectation of long-term stable contractual cash flows, (iii) the implementation
      of non-discriminatory access to transmission systems, providing independent
      power producers access to regional electricity markets; and (iv) the efficiency
      of independent power producers.




6





*China
      Hydropower Industry*





The
      power
      industry of China has taken on a brand new look before the whole world.
      Meanwhile, its hydropower construction is stepping into a new developing age.
      Over the past few years, China has made great achievements in hydropower
      construction. The projects under construction are performing on an unprecedented
      scale. The large and medium hydropower generating units put into operation
      set a
      new world record in 2004. Many countries, including China, share an identical
      perception on hydropower development --- giving priority to developing
      hydropower in an environmental-friendly and social-harmonious manner. China,
      which is currently in an era of rapid economic growth with steadily increasing
      demand for energy, has taken the development of hydro-energy resources as a
      key
      energy strategy for the protection of environment, reduction of greenhouse
      gas
      emission and saving of resources.




In
      2006,
      China generated 2755.7 billion KWH of energy, a 13.67% increase compared with
      2005, while the amount of energy generated from hydropower reached 378.3 billion
      KWH, a 3.5% increase compared to the prior year. The proportion of hydropower
      to
      all energy generated was 13.7% in 2006, a decrease of 1.5% from 2005. The pace
      of construction of hydropower stations appears to be slower in China than the
      pace of construction of other energy producing facilities. The total output
      of
      new energy generating facilities put into service in 2006 was 101,170 MW. The
      gross installed energy generating capacity at the end of 2006 reached 622,000
      MW, an increase of 20.3% as compared to the prior year. As for the composition
      of power sources, the percentage of thermal power was 77.8 %, an increase of
      2.1
      percentage points; and the percentage of hydropower was 20.7 %, a decrease
      of
      2.0 percentage points. This decrease was the result of China’s focus on short
      term improvements in the supply of energy during a time of electric power
      shortages. The average exploitation level of hydropower in developed countries
      is above 60%. Among the countries, the percentage of exploited hydroelectric
      resources is about 82% in the USA, 84% in Japan and 65% in Canada. Comparing
      with these countries, the hydroelectric development in China is still at a
      comparatively low level, and still has great development potential.




At
      present, the installed generation capacity of hydropower all over the world is
      about 800 million KW, which satisfies approximately 20% of the demand for global
      electricity. The development and utilization of hydro energy resource has made
      significant contributions to human civilization and social progress. China
      is
      relatively rich in hydro energy resource, of which the installed generation
      capacity available for exploitation exceeds 400 million KW, and the annual
      energy output is more than 1700 billion KW. As of 2003, the number of rivers
      that had the potential to generate at least 1,000 KW of hydro energy in China
      was 33,886. Moreover, these rivers have the potential of generating 6080 billion
      KWH of electricity each year, with an average output 694 million KW or 1/6
      of
      the world’s electricity needs. Therefore, the development of the hydro power
      industry in China has great potential.




Our
      emphasis on the exploitation of resources in the western part of Southwest
      China
      is very rich in hydro power resource, and 68% of the total amount of hydro
      power
      resource available for exploitation is concentrated in this region, of which
      less than 10% of the available resources have been developed. The exploitation
      of hydro power in the Southwest may promote the development of related
      industries such as communications, cement, steel and electromechanical. The
      positive and steady implementation of the plan "Transport the Electricity from
      the West to the East" may optimize the power utilization structure in the
      eastern part of China and improve the regional ecological environment, while
      offering the electricity required by the development of the East.




In
      accordance with preliminary planning, by the year of 2020, the amount of
      installed hydro power capacity in China will reach 270 million KW, comprising
      29% of all of China’s energy generating capacity, and the hydroelectric
      development level will reach 68%. The direct benefit of this hydropower
      production will be tantamount to saving 420 million tons of coal. Specifically,
      this increase in hydro power should result in a reduction of 1.17 billion tons
      of CO2, 7.5 million tons of sulfur dioxide and other kinds of harmful gas.
      Hydro
      power will play an important role in the reduction of global air pollution
      and
      greenhouse effects and help improve the environment. Hydropower construction
      may
      also lead to other benefits like flood prevention, irrigation and
      transportation, and at the same time promote economic growth and social
      development, while alleviating poverty. Therefore, the hydropower industry
      has a
      great long-term potential and is endorsed by a number of institutional
      investors.




7




The
      year
      2006 marked the beginning of China's 11th Five-Year Plan. In the first three
      quarters, thanks to sound fiscal and monetary policies, the national economy
      continued to head for the anticipated direction, achieving fast growth and
      providing reasonable assurance for the healthy development of the hydropower
      industry.




For
      the
      first three quarters of 2006, power generation totaled 2011.1 billion kWh,
      a
      rise of 12.9% increase from the prior year. The power generation growth rate
      dropped 0.5 of a percentage point from the prior year, largely due to a slowdown
      of hydropower generation. For the first three quarters of 2006, hydropower
      generation rose 6.4% from the prior year, though the growth rate decreased
      14.6
      percentage points from the previous year. In contrast, electricity from
      coal-fired power climbed 14.5% from 2005, an increase of 2.3 percentage
      points.





Due
      to
      enhanced power supply capacity, the power shortage in China was eased
      significantly. During peak seasons, the maximum power shortage was approximately
      13 million kW, less than half of the power shortage in 2005, while the number
      of
      blackouts decreased 91.3% over the same period.





**Hydropower
      Development and Current Situation in China**




China
      is
      bestowed with a lot of rivers which, combined with the geographic and climate
      conditions, provide an abundant water energy source. Based on comprehensive
      investigation and assessment, the theoretical reserve of water resource in
      China
      is 688GW, with a possible annual power generation capacity of 5920 billion
      kWh.
      From latest overall economic, technical and environmental assessment and
      screening, water resources that can be developed and utilized for hydropower
      is
      448GW. These water resources have the potential to produce 2470 billion kWh
      of
      energy each year, which is equivalent to that produced by the combustion of
      about 0.9 billion tons of coal. China has the most sources of water energy
      in
      the world, which is an important and precious resource for the economic
      development in China.




Although
      China built its first hydropower station in 1912 (at Shilong Dam in Yunnan
      Province, with an installed capacity of 500kW), the actual development and
      utilization of hydropower started in the later half of the twentieth century
      due
      to the delay of the industrialization process. After more than 50 years of
      construction, the hydropower installed capacity of China reached 92.17GW in
      2003, making up 24% of the total electric power output, generating 283 billion
      kWh of energy each year which accounted for about 14.8% of China’s total energy
      output. It can be seen from the reserves of water energy that the development
      level of China in hydropower is far behind those countries with relatively
      rich
      water resources. Tables 1 and 2 show respectively the development status of
      different nations in the world and the development course of China in hydropower
      industry.




**Table
      1  Development status of different nations in the
      world**




Nation
            
            Total
                reserve developable (GW)
            
            Developed
                capacity (GW)
            
            Development
                ratio (%)
            
            Year
                of dataChina
            
            
            448
            
            
            100
            
            
            22.3
            
            
            2004USA
            
            
            194.30
            
            
            84.15
            
            
            43.3
            
            
            1986Canada
            
            
            152.90
            
            
            65.67
            
            
            42.9
            
            
            1997Brazil
            
            
            213.00
            
            
            54.51
            
            
            25.6
            
            
            1997Russia
            
            
            269.00
            
            
            62.14
            
            
            23.1
            
            
            1986India
            
            
            84.00
            
            
            22.01
            
            
            26.2
            
            
            1997Japan
            
            
            35.15
            
            
            33.39
            
            
            95.0
            
            
            1986France
            
            
            22.80
            
            
            21.00
            
            
            92.1
            
            
            1986Norway
            
            
            38.00
            
            
            26.00
            
            
            68.4
            
            
            1997Italy
            
            
            19.20
            
            
            17.86
            
            
            93.0
            
            
            1986Spain
            
            
            29.22
            
            
            18.00
            
            
            61.6
            
            
            1997




Note:
      The
      data in 1986 come from “China River Hydropower Planning in the 20th Century” and
      the data in 1997 from “International Water Power and Dam Construction” in
      1999.




**Table
      2  History and future prediction of hydropower development in
      China**




Year
            
            Installed
                capacity of hydropower (GW)
            
            Year
            
            Installed
                capacity of hydropower (GW)1912
            
            
            0.0005
            
            
            1988
            
            
            32.6981949
            
            
            0.163
            
            
            1991
            
            
            37.8841955
            
            
            0.498
            
            
            1996
            
            
            52.1841960
            
            
            1.941
            
            
            1999
            
            
            72.971965
            
            
            3.02
            
            
            2000
            
            
            77.0851970
            
            
            6.235
            
            
            2003
            
            
            92.171975
            
            
            13.428
            
            
            2004
            
            
            100.00
                (predicted
            )1978
            
            
            17.277
            
            
            2010
            
            
            147.35
                (predicted
            )1980
            
            
            20.318
            
            
            2020
            
            
            257.86
                (predicted
            )1985
            
            
            26.415




8




Of
      the
      installed capacity of 100GW that has been developed in China, more than 28GW
      is
      contributed by about 40,000 small hydropower stations with an installation
      capacity below 50MW each, accounting for 33% of China’s total hydropower
      capacity. There are many small hydropower resources, which can play an active
      and effective role in power supply to the rural and remote mountainous regions
      that power grids can hardly cover, and are also favorable to environmental
      protection by replacing coal-fired energy. Small hydropower stations can be
      invested in a decentralized way with most investors being individuals and
      collective groups. Thus, the advantages of easy financing, relatively
      less-sophisticated technology and equipment and short construction periods
      make
      small hydropower an important renewable energy source that should not be
      neglected. As a result, the Chinese government has listed small hydropower
      stations among the renewable energy sources supported by preferential
      policies.




The
      medium and large-sized hydropower stations with installation capacities above
      50MW constitute the largest source of hydropower in China. Through more than
      50
      years construction and development, over 230 stations of such scale have been
      set up, among which 25 stations are above 1000MW and 40 are above 500MW. These
      medium- and large- sized stations demonstrate that China has the capability
      to
      build all types of hydropower stations, and have laid down a sound basis in
      professional personnel and teams specialized in survey, scientific researches,
      design and construction, as well as in specifications and standards,
      organizational structure and technologies. The successful construction of the
      Yangtze Three Gorges Hydropower Station demonstrates that China’s ability as a
      world leader in developing very large stations. As such, we believe that
      investing in China’s hydropower industry has significant potential.





***China
      Minerals Holdings, Inc.***





China
      Mineral Holdingsis a development stage mining company with the aim of
      establishing, expanding, and diversifying it presence in the mining resource
      industry in China and throughout the world, in its precious and rare metals
      resource and properties by securing mining licenses for production and through
      strong joint venture partners in China.  China Mineral Holdings intends to
      establish the production of high-margin rare metals (Vanadium (V2O5), Molybdenum
      (Mo), Uranium (U)) and to increase its mineral resource inventory and mining
      life though exploration, production and the development of multi-commodity
      project pipe lines. Furthermore, China Mineral Holdings’ mining projects
      and prospects will be based on rigorous economic evaluation and will
      subsequently be advanced though joint-ventures.





Financing
      transactions may include the issuance of equity or debt securities, obtaining
      credit facilities, or other financing mechanisms. There can be no assurance
      that
      we will be successful in obtaining financing and that this line of business
      will
      be successfully developed.





***China
      Health Holdings, Inc.***





China
      Health is a development stage company with the goal of becoming a leading
      developer, manufacturer, marketer and distributor of pharmaceutical drugs and
      dietary supplements in China and throughout the world. China Health Holdings'
      main objective is to partner with CHINA -SFDA approved drug producers, GMP
      certified manufacturing facilities, research and development centers and
      universities in China. China Health's goals for 2008-2013 include the profitable
      penetration of the Chinese pharmaceutical industry through mergers and
      acquisitions with leading pharmaceutical companies in China. Specifically,
      China
      Health’s strategy is to leverage synergies, integrate drug pipelines and
      distribution channels, and management expertise between pending pharmaceutical
      acquisitions.




China
      Holdings, will via China Health Holdings, Inc. continues its Merger &
Acquisition and Transactions and development in pharmaceutical projects in
      later
      2008 and 2009 upon China-SFDA firm its revolutionize its drug policies. China
      Holdings has agreed an authorized to its wholly-owned subsidiary: China
      Health to take over its all pharmaceutical projects and TCM-Based Medicinal
      Projects developed in the past to complete and development further. Our goals
      for 2008-2013 include the profitable penetration of the Chinese pharmaceutical
      industry by merger and acquisition (M&A) leading pharmaceutical companies in
      China via/under our wholly-owned subsidiary: China Health Holdings, Inc. Our
      strategy is to leverage synergies, integrate drug pipelines and distribution
      channels, and management expertise between pending pharmaceutical acquisitions.
      We intend to develop a Taoist Medicine product line and a Vitamins and
      Supplements product line over the next twelve months. All of the products for
      these product lines are fully developed. All of our manufacturing will be
      outsourced to third parties. We plan to generate revenues by sales of our herbal
      supplement products (1) through a website that is currently under construction,
      (2) through retail and wholesale distributors, and (3) through the establishment
      of retail stores in major cities in North America. While in the past our current
      operations and sales were in Canada, we anticipate expanding our sales into
      the
      United States over the next six to twelve months and, thereafter, into regions
      of Europe and Asia. All of our products are based on traditional Chinese
      medicine and the principals of Taoism. Taoist philosophy and Taoist medicinal
      healing practices have been incorporated into a broad spectrum of medical
      practices and treatments in the People's Republic of China. Traditional Chinese
      medicine practices have generally been labeled worldwide as "alternative
      medicine" or "holistic medicine" since they rely more on natural remedies versus
      chemical remedies and treatments.




9





We
      intend
      to acquire businesses, or enter into strategic business agreements, to
      manufacture, market and sell proprietary neutraceutical products.
      Neutraceuticals are products isolated or purified from plants or other foods
      that are sold in dosage form. These products are intended to provide certain
      physiological benefits and/or protection against chronic disease.
      Neutraceuticals are commonly referred to as "dietary supplements" or
      "nutritional supplements." Neutraceuticals are generally viewed as preventive
      supplements, as opposed to drugs, which are active chemical substances used
      to
      treat illnesses or symptoms of illnesses. Neutraceuticals represent an
      alternative approach to medicine, based on nutrition and the health or wellness
      of the entire body rather than treating the symptoms of a disease or illness.
      Since most of our potential future business acquisitions, or strategic business
      agreements, will be in the manufacture of products that are considered to be
      dietary supplements, as opposed to pharmaceutical products or drugs, it will
      not
      be subject to stringent clinical testing to which pharmaceutical products are
      subjected. All future business acquisitions, or strategic business agreements,
      will manufacture products that are manufactured in accordance with Good
      Manufacturing Practices rules and standards.




We
      intend
      to manufacture, market and distribute proprietary natural medicinal products
      under our wholly-owned subsidiary: China Health Holdings, Inc. All of our
      products are based on traditional Chinese medicine and the principals of Taoism.
      Taoist philosophy and Taoist medicinal healing practices have been incorporated
      into a broad spectrum of medical practices and treatments in the People's
      Republic of China. Traditional Chinese medicine practices have generally been
      labeled worldwide as "alternative medicine" or "holistic medicine" since they
      rely more on natural remedies versus chemical remedies and
      treatments.




**China
      Health’s**  **Products**





We
      intend
      to manufacture, market and sell proprietary neutraceutical products.
      Neutraceuticals are products isolated or purified from plants or other foods
      that are sold in dosage form. These products are intended to provide certain
      physiological benefits and/or protection against chronic disease.
      Neutraceuticals are commonly referred to as "dietary supplements" or
      "nutritional supplements." Neutraceuticals are generally viewed as preventive
      supplements, as opposed to drugs, which are active chemical substances used
      to
      treat illnesses or symptoms of illnesses. Neutraceuticals represent an
      alternative approach to medicine, based on nutrition and the health or wellness
      of the entire body rather than treating the symptoms of a disease or illness.
      Since most of our products are considered to be dietary supplements, as opposed
      to pharmaceutical products or drugs, our existing product line is not subject
      to
      stringent clinical testing to which pharmaceutical products are subjected.
      All
      of our products are manufactured in accordance with Good Manufacturing Practices
      rules and standards.




We
      also
      plan to introduce a line of natural skin care and cosmetic products as well
      as
      to develop new products based on our knowledge of traditional Chinese medical
      practice. Our product lines are based on two key fundamentals - the healing
      power of King of Herbs and the thousands of years of history that forms the
      basis for traditional Chinese medicine and Taoist medicine.





**China
      Health Market Competition**





The
      nutritional supplements retail industry is a large, highly fragmented and
      growing industry, with no single industry participant accounting for more than
      10% of total industry retail sales. Competition is based primarily on price,
      quality and assortment of products, customer service, marketing support and
      availability of new products.





We
      compete with publicly owned and privately owned companies, which are highly
      fragmented in terms of geographical market coverage and product categories.
      We
      compete with specialty retailers, including GNC Corporation, Vitamin World
      and
      Vitamin Shoppe(R), supermarkets, drugstores, mass merchants, multi-level
      marketing organizations, mail order companies and a variety of other smaller
      participants. In addition, the market is highly sensitive to the introduction
      of
      new products, including various prescription drugs, which may rapidly capture
      a
      significant share of the market. In the United States, we also compete with
      supermarkets, drugstores and mass merchants with heavily advertised national
      brands manufactured by large pharmaceutical and food companies, as well as
      with
      the Nature's Bounty and Nature's Wealth brands, sold by Vitamin World and other
      retailers. Our international competitors also include large international
      pharmacy chains and major international supermarket chains as well as other
      large U.S.-based companies with international operations. Our wholesale and
      manufacturing operations also compete with other wholesalers and manufacturers
      of third-party nutritional supplements such as Tree of Life and Leiner Health
      Products.





**China
      Health Global Marketing and Sales Strategy**





Our
      management recognizes that different markets offer different opportunities
      for
      growth in sales. The following are marketing and sales initiatives that we
      intend to implement to market our products:





1. Global
      E-Commerce Infrastructure - We
      intend to target customers through our e-commerce website. We are currently
      working to establish and enhance our website to be capable of handling retail
      transactions with multiple payment forms (i.e., credit card, check and
      alternative payment systems), in multiple currencies and in multiple languages.
      The E-Commerce Infrastructure will offer complete online selling features which
      are fully integrated with our global IT infrastructure that balances
      flexibility. Our website will offer both functionality and integration with
      global customers and trading partners.




10




Our
      Online Shopping Portal will also provide cross-sell and up sell capabilities
      which we believe will increase incremental potential revenue. It will also
      offer
      the capability to offer industrial strength capacity for high volume of 100,000
      SKUs and numerous configuration. Our e-commerce website will also offer
      comprehensive features with online customer services, discounts offers and
      customer pricing features, aimed at creating customer satisfaction and
      loyalty.





We
      believe that our E-Commerce Infrastructure addresses pressures to improve
      employee effectiveness and lower the total cost of ownership and increase
      productivity, increase customers services and satisfaction and improve employee
      satisfaction. In addition, we believe that our e-commerce infrastructure is
      the
      comprehensive way for us to market, distribute and commercialize our natural
      medicinal herbal product lines to the global markets and audiences. We believe
      that the site will allow us to reach consumers globally, effectively and
      efficiently, while we continue the development of our global retail and
      franchise infrastructures. We believe that E-Commerce has been proven to be
      a
      cost-effective way to reach large consumers audiences, and we plan to commence
      an aggressive global marketing and distribution and commercialization program
      once our site is operational. Our e-commerce strategy represents one of the
      important parts of our goal of becoming a leading global provider of
      neutraceutical and pharmaceutical products.





2. Global
      Retail and Wholesale Distribution - We
      believe that one of the fastest ways to penetrate the neutraceuticals market
      is
      to secure distribution through an established system of retailers in order
      to
      take advantage of their current client base. We are in negotiation with several
      distribution companies with a view to distributing our products.




**China
      Health Recent Developments**





We
      have
      agreed to sign off all the acquisitions agreements to our wholly owned
      subsidiary: China Health Holdings, Inc. Due to China-SFDA’s Pharmaceutical Drugs
      Policies Revolutionary Development and Drugs Policies’ amendment in early 2007,
      China Health Holdings will continue its efforts and development on the
      Acquisition and Mergers and Transactions in 2009.





**China
      Health Acquisitions** ****





As
      of
      December 31, 2007 and through March 31, 2008, the Company has entered into
      numerous acquisition agreements, and business cooperation agreements, with
      many
      business entities and governmental entities in the People's Republic of China.
      As of December 31, 2007 and through March 31, 2008, the Company has not
      completed and finalized any of these acquisition and business cooperation
      agreements. The management of the Company believes that they do not have any
      liability with regards to these acquisition and business cooperation agreements
      if they should not be completed and finalized. In addition, to the extent that
      the acquisition and business cooperation agreements require cash for them to
      be
      consummated, or commenced upon, the Company may not have adequate cash and/or
      financing resources, nor might the Company have the ability to obtain adequate
      cash and/or financing resources.





Further
      pharmaceutical acquisitions and transactions are subject to the Company
      completing certain due diligence requirements and obtaining financing from
      third
      parties. As of December 31, 2007, the transactions have not closed. Management
      has not determined if it can complete these transactions. Management believes
      that they have no liabilities with regards to this transactions if the
      acquisitions can not be completed.




**China
      Health Government Regulation**





The
      processing, formulation, manufacturing, packaging, labeling, advertising and
      distribution of our products are subject to regulation by one or more federal
      agencies, including the Health Protectorate Branch in Canada, and in the United
      States, the Food and Drug Administration ("FDA"), the Federal Trade Commission
      ("FTC"), the Consumer Product Safety Commission, the United States Department
      of
      Agriculture, United States Customs and Border Protection and the Environmental
      Protection Agency. These activities are also regulated by various agencies
      of
      the states and localities in which our products are sold. Our products sold
      in
      other foreign countries are also subject to regulation under various national,
      local, and international laws that include provisions governing, among other
      things, the processing, formulation, manufacturing, packaging, labeling,
      advertising and distribution of dietary supplements and over-the-counter drugs.
      Government regulations in foreign countries may prevent or delay the
      introduction, or require the reformulation, of certain of our products. Below
      is
      a summary of government regulation of our products in the United States, which
      is where we intend to focus our marketing efforts over the next twelve
      months.





Pursuant
      to the Federal Food, Drug, and Cosmetic Act ("FDCA"), the FDA regulates the
      processing, formulation, safety, manufacture, packaging, labeling and
      distribution of dietary supplements, (including vitamins, minerals, herbs)
      and
      over-the-counter drugs. The FTC has jurisdiction to regulate the advertising
      of
      these products. The FDCA has been amended several times with respect to dietary
      supplements, in particular by the Dietary Supplement Health and Education Act
      of
      1994 ("DSHEA"). DSHEA established a new framework governing the composition,
      safety, labeling and marketing of dietary supplements. "Dietary supplements"
      are
      defined as vitamins, minerals, herbs, other botanicals, amino acids and other
      dietary substances for human use to supplement the diet, as well as
      concentrates, metabolites, constituents, extracts or combinations of such
      dietary ingredients. Generally, under DSHEA, dietary ingredients that were
      on
      the market prior to October 15, 1994 may be used in dietary supplements without
      notifying the FDA. "New" dietary ingredients (i.e., dietary ingredients that
      were "not marketed in the United States before October 15, 1994") must be the
      subject of a new dietary ingredient notification submitted to the FDA unless
      the
      ingredient has been "present in the food supply as an article used for food"
      without being "chemically altered." A new dietary ingredient notification must
      provide the FDA evidence of a "history of use or other evidence of safety"
      establishing that use of the dietary ingredient "will reasonably be expected
      to
      be safe." A new dietary ingredient notification must be submitted to the FDA
      at
      least 75 days before the initial marketing of the new dietary ingredient. There
      is no certainty that the FDA will accept any particular evidence of safety
      for
      any new dietary ingredient. The FDA's refusal to accept such evidence could
      prevent the marketing of such dietary ingredients.




11




DSHEA
      permits "statements of nutritional support" to be included in labeling for
      dietary supplements without FDA pre-market approval. Such statements must be
      submitted to FDA within 30 days of marketing and must bear a label disclosure
      that "This statement has not been evaluated by the Food and Drug Administration.
      This product is not intended to diagnose, treat, cure, or prevent any disease."
      Such statements may describe how a particular dietary ingredient affects the
      structure, function or general well-being of the body, or the mechanism of
      action by which a dietary ingredient may affect body structure, function or
      well-being, but may not expressly or implicitly represent that a dietary
      supplement will diagnose, cure, mitigate, treat, or prevent a disease. A company
      that uses a statement of nutritional support in labeling must possess scientific
      evidence substantiating that the statement is truthful and not misleading.
      If
      the FDA determines that a particular statement of nutritional support is an
      unacceptable drug claim or an unauthorized version of a disease claim for a
      food
      product, or if the FDA determines that a particular claim is not adequately
      supported by existing scientific data or is false or misleading, we would be
      prevented from using the claim.





In
      addition, DSHEA provides that so-called "third-party literature," e.g., a
      reprint of a peer-reviewed scientific publication linking a particular dietary
      ingredient with health benefits, may be used "in connection with the sale of
      a
      dietary supplement to consumers" without the literature being subject to
      regulation as labeling. Such literature must not be false or misleading; the
      literature may not "promote" a particular manufacturer or brand of dietary
      supplement; and a balanced view of the available scientific information on
      the
      subject matter must be presented. If the literature fails to satisfy each of
      these requirements, we may be prevented from disseminating such literature
      with
      our products, and any dissemination could subject our product to regulatory
      action as an illegal drug.





We
      expect
      that the FDA will adopt in the near future the final regulations, proposed
      on
      March 13, 2003, regarding Good Manufacturing Practice in manufacturing, packing,
      or holding dietary ingredients and dietary supplements, authorized by DSHEA.
      Good Manufacturing Practice regulations will require dietary supplements to
      be
      prepared, packaged and held in compliance with strict rules, and will require
      quality control provisions similar to those in the Good Manufacturing Practice
      regulations for drugs. We or our third-party supplier or vendors may not be
      able
      to comply with the new rules without incurring substantial additional
      expenses.




The
      FDA
      has broad authority to enforce the provisions of the FDCA applicable to dietary
      supplements, including powers to issue a public warning letter to a company,
      to
      publicize information about illegal products, to request a recall of illegal
      products from the market, and to request the Department of Justice to initiate
      a
      seizure action, an injunction action, or a criminal prosecution in the United
      States courts. The FDA may also issue an Import Alert for any products it
      considers misbranded, adulterated and/or unapproved new drugs. Customs would
      block the admission of these products from entry into the country. The
      regulation of dietary supplements may increase or become more restrictive in
      the
      future.





The
      FDA
      may also make a determination that some of our products either contain drug
      claims or that certain ingredients of our products are not dietary, or even
      new
      dietary ingredients, but unapproved new drugs. Any of these determinations
      could
      block the marketing of these products in the United States.





We
      cannot
      determine what effect additional domestic or international governmental
      legislation, regulations or administrative orders, when and if promulgated,
      would have on our business in the future. New legislation or regulations may
      require the reformulation of certain products to meet new standards, require
      the
      recall or discontinuance of certain products not capable of reformulation,
      impose additional record keeping or require expanded documentation of the
      properties of certain products, expanded or different labeling, or scientific
      substantiation.





***Employees***





None
      of
      our employees are covered by a collective bargaining agreement. We consider
      relations with our employees to be good. In order for us to attract and retain
      quality personnel, we anticipate we will have to offer competitive salaries
      to
      future employees. We anticipate that it may become desirable to add additional
      full and or part time employees to discharge certain critical functions during
      the next 12 months. This projected increase in personnel is dependent upon
      our
      ability to generate revenues and obtain sources of financing. There is no
      guarantee that we will be successful in raising the funds required or generating
      revenues sufficient to fund the projected increase in the number of employees.
      As we continue to expand, we will incur additional cost for
      personnel.




12





***INTELLECTUAL
      PROPERTY***





Our
      success depends in part on our ability to protect our intellectual property.
      To
      protect our proprietary rights, we rely generally on copyright, trademark and
      trade secret laws, confidentiality agreements with employees and third parties,
      and agreements with consultants, vendors and customers, although we have not
      signed such agreements in every case. Despite such protections, a third party
      could, without authorization, copy or otherwise obtain and use our intellectual
      property. We can give no assurance that our agreements with employees,
      consultants and others who participate in development activities will not be
      breached, or that we will have adequate remedies for any breach, or that our
      trade secrets will not otherwise become known or independently developed by
      competitors.




We
      may
      pursue the registration of certain of our trademarks and service marks in the
      United States, although we have not secured registration of all our marks.
      In
      addition, the laws of some foreign countries do not protect our proprietary
      rights to the same extent as do the laws of the United States, and effective
      copyright, trademark and trade secret protection may not be available in such
      jurisdictions. In general, there can be no assurance that our efforts to protect
      our intellectual property rights through copyright, trademark and trade secret
      laws will be effective to prevent misappropriation of our content. Our failure
      or inability to protect our proprietary rights could materially adversely affect
      our business financial condition and results of operations.


We
      have
      also obtained the right to the Internet addresses www.chinaholding.net and www.chinaholdings.org .
      As with
      phone numbers, we do not have and cannot acquire any property rights in an
      Internet address. We do not expect to lose the ability to use these Internet
      addresses; however, there can be no assurance in this regard and the loss of
      either of these addresses could materially adversely affect our business
      financial condition and results of operations.





**Item
      2. Description of Property.**





Our
      principal executive offices are located at 101 Convention Center Drive, Suite
      700, Las Vegas, NV 89109-200 USA, our China back office and mailing address
      for
      Corporate and shareholder correspondence is located at 8E - C2, Global Trade
      mansion, No.9, A, Guanghua Road, Chaoyang District, Beijing PR China 100020.
      Our
      telephone number is 86-10-65864770 and Fax line is 86-10-6586-4790 in
      China.





**Item
      3. Legal Proceedings.**





We
      are
      currently not involved in any litigation that we believe could have a material
      adverse effect on our financial condition or results of operations. There is
      no
      action, suit, proceeding, inquiry or investigation before or by any court,
      public board, government agency, self-regulatory organization or body pending
      or, to the knowledge of the executive officers of our company or any of our
      subsidiaries, threatened against or affecting our company, our common stock,
      any
      of our subsidiaries or of our companies or our subsidiaries' officers or
      directors in their capacities as such, in which an adverse decision could have
      a
      material adverse effect.





**Item
      4. Submission of Matters to a Vote of Security Holders.**





No
      matter
      was submitted to a vote of security holders during the fourth quarter of the
      fiscal year 2007 covered by this report.




13





**PART
      II**





**Item
      5.  Market for Common Equity, Related Stockholder Matters and Small
      Business Issuer Purchases of Equity Securities.**





Commencing
      April 18, 2005 through May 10, 2007, our common stock trades on the Over the
      Counter Bulletin Board (“OTCBB”) under the symbol **“** CHHH **.”** and
      since May 11, 2007 our trading symbol has been CHHL on the Over the Counter
      Bulletin Board (“OTCBB”). Prior to April 18, 2005, there was no active market
      for our common stock. The following table sets forth the high and low bid prices
      for our common stock for the periods indicated, as reported by the OTC Bulletin
      Board. The quotations reflect inter-dealer prices, without retail mark-up,
      mark-down or commission, and may not represent actual transactions.





Trading
      in our common stock has been limited and sporadic. The following table shows
      the
      range of high and low bid quotations reported by the OTCBB from First Quarter
      2006 to the Fourth Quarter, 2007.





***High***
            
            ***Low******Fiscal
                Year 2006******First
                Quarter***
            
            ***$***
            ***0.25***
            
            ***$***
            ***0.10******Second
                Quarter***
            
            ***$***
            ***0.15***
            
            ***$***
            ***0.08******Thirds
                Quarter***
            
            ***$***
            ***0.11***
            
            ***$***
            ***0.04******Fourth
                Quarter***
            
            ***$***
            ***0.59***
            
            ***$***
            ***0.03******Fiscal
                Year 2007******First
                Quarter***
            
            ***$***
            ***0.185***
            
            ***$***
            ***0.043******Second
                Quarter***
            
            ***$***
            ***0.06***
            
            ***$***
            ***0.03******Third
                Quarter***
            
            ***$***
            ***0.046***
            
            ***$***
            ***0.022******Fourth
                Quarter***
            
            ***$***
            ***0.12***
            
            ***$***
            ***0.025***





The
      last
      reported sales price of our common stock on the OTC Bulletin Board on April
      3,
      2008 was $0.05 per share.  As of April 3, 2008, there were
      approximately 145 holders of record of our common stock and one holder of record
      of our Series “A” Preferred Stock.





**Holders**





As
      of
      March 31, 2008, there were 185,207,060 shares of our common stock issued and
      outstanding and 1,250,000 shares of Series “A” Preferred Stock outstanding.
      There are approximately 145stockholders of record of our common stock and 1
      holder of our Series “A” Preferred Stock.





As
      of
      December 31, 2007 there were 180,607,060shares of our common stock issued and
      outstanding, there were 17,877,753  shares
      of
      our common stock subject to outstanding options to purchase our common stock
      and
      there was 76,069,000shares of our common stock subject to outstanding warrants
      to purchase our common stock and 1,250,000 shares of our preferred stock are
      subject to outstanding warrants to purchase our preferred stock.





**Dividends**




On
      February 28, 2006, our Board of Directors declared a 25% stock dividend. Each
      shareholder of record at the close of business on February 28, 2006 received
      one
      share for every four shares held. The dividend was paid on March 17,
      2006.




Our
      proposed operations are capital intensive and we will require working capital.
      Therefore, we will be required to reinvest any future earnings in its
      operations. Our Board of Directors has no present intention of declaring any
      cash dividends, as we expect to re-invest all profits in the business for
      additional working capital for continuity and growth. **** Any
      future determination to pay dividends on our common stock will depend upon
      our
      results of operations, financial condition and capital requirements, applicable
      restrictions under any contractual arrangements and such other factors deemed
      relevant by the our Board of Directors. There are no restrictions in our
      articles of incorporation or bylaws that restrict us from declaring dividends.
      The Nevada Revised Statutes, however, do prohibit us from declaring dividends
      where, after giving effect to the distribution of the dividend:





(1)
      we
      would not be able to pay our debts as they become due in the usual course of
      business; or




(2)
      our
      total assets would be less that the sum of our total liabilities.




14




**Capital
      Structure**





Our
      authorized capital stock consists of 2,020,000,000 shares of capital stock,
      par
      value $.001 per share, of which 2,000,000,000 shares are common stock and
      20,000,000 shares are preferred stock that may be issued in one or more series
      at the discretion of the Board of Directors.





On
      February 22, 2008, the Company filed a Certificate of Amendment to Articles
      of
      Incorporation (the “Certificate of Amendment”) with the Nevada Secretary of
      State to increase the number of authorized shares of common stock of the
      Company, par value $.001 per share, from three hundred million (300,000,000)
      to
      two billion (2,000,000,000) shares.





***Common
      Stock***




The
      holders of common stock are entitled to one vote for each share held of record
      on all matters to be voted on by the stockholders. The holders of common stock
      are entitled to receive dividends ratably, when, as and if declared by the
      Board
      of Directors, out of funds legally available therefore. In the event of a
      liquidation, dissolution or winding-up of the Registrant, the holders of common
      stock are entitled to share equally and ratably in all assets remaining
      available for distribution after payment of liabilities and after provision
      is
      made for each class of stock, if any, having preference over the common
      stock.





The
      holders of shares of common stock, as such, have no conversion, preemptive,
      or
      other subscription rights and there are no redemption provisions applicable
      to
      the common stock. All of the outstanding shares of common stock are validly
      issued, fully paid and non-assessable.





***Preferred
      Stock***





Shares
      of preferred stock may be issued from time to time in one or more series as
      may
      from time to time be determined by our Board of Directors. Our Board of
      Directors has authority, without action by the stockholders, to determine the
      voting rights, preferences as to dividends and liquidation, conversion rights
      and any other rights of such series. Any preferred shares, if and when issued
      in
      the discretion of the Board of Directors, may carry voting, conversion or other
      rights superior to those of the shares of common stock and may adversely affect
      the voting power and rights of the common stockholders.




On
      February 21, 2006, we filed a Certificate of Designation, Powers Preferences
      and
      Rights of Series “A” Preferred Stock with the state of Nevada, which was amended
      on June 19, 2006 which authorizes the issuance of up to 2,500,000 shares of
      Series “A” Preferred Stock, par value $0.001 per share. The Series A Preferred
      Stock has a stated value of $0.15 and a liquidation preference over our common
      stock and any other class or series of capital stock whose terms expressly
      provide that the holders of Series A Preferred Stock should receive preferential
      payment. Holders of Series A Preferred Stock are entitled to vote on all matters
      submitted to our shareholders of and are entitled to two votes for each share
      of
      Series A Preferred Stock owned. Holders of shares of Series “A” Preferred Stock
      vote together with the holders of common stock on all matters and do not vote
      as
      a separate class.





Beginning
      two years from the date of issuance of the Series A Preferred Stock, each one
      share of Series A Preferred Stock is convertible, at the option of the holder,
      into two shares of our common stock. However, holders cannot convert any share
      of Series A Preferred Stock if the market price of our common stock is below
      $1.00 per share. Notwithstanding the limitation on any conversions of the Series
      A Preferred Stock when our Common Stock is below $1.00 per share, if prior
      to
      two years from the date of issuance, there is a sale or other disposition of
      all
      or substantially all of our assets, a transaction or series of related
      transactions in which more than 50% of the voting power of the Company is
      disposed of, or upon a consolidation, merger or other business combination
      where
      we are not the survivor, then immediately prior to such event each holder of
      Series A Preferred Stock may convert any or all of such holder's shares of
      Series A Preferred Stock into common stock as described above. The Certificate
      of Designation also provides that the holders of Series A Preferred Stock shall
      be entitled to any distribution by us of our assets, which would have been
      payable to the holders of the Series A Preferred Stock with respect to the
      shares of Common Stock issuable upon conversion had such holders been the
      holders of such shares of Common Stock on the record date for the determination
      of shareholders entitled to such distribution. To date there are 1,250,000
      shares of Series “A” Preferred Stock outstanding.





***Securities
      Authorized for Issuance Under Equity Compensation Plan*** **s**





The
      following table shows information with respect to each equity compensation
      plan
      under which the Company's common stock is authorized for issuance as of the
      fiscal year ended December 31, 2007.





**EQUITY
      COMPENSATION PLAN INFORMATION**




**Plan
                category**
            
            **Number
                of securities**
              **to
                be issued upon**
              **exercise
                of**
              **outstanding
                options,**
              **warrants
                and rights**
            
            **Weighted
                average**
              **exercise
                price of**
              **outstanding
                options,**
              **warrants
                and rights**
            
            **Number
                of securities**
              **remaining
                available for future issuance under equity compensation plans (excluding
                securities reflected in column (a)****(a)**
            
            **(b)**
            
            **(c)****Equity
                compensation plans approved by security holders**
            
            
            -0-
            
            
            -0-
            
            
            -0-**Equity
                compensation plans not approved by security
                holders**
            
            
            -0-
            
            
            -0-
            
            
            -0-**Total**
            
            
            -0-
            
            
            -0-
            
            
            -0-




15





Our
      Board
      of Directors adopted the China Health Holding, Inc. 2005 Incentive Stock Plan
      (the “Plan”). We filed with the SEC, a registration statement on Form S-8
      Registration Statement, as amended to register up to 9,000,000 shares of Common
      Stock underlying options issuable pursuant to the Stock Plan. To date no options
      have been issued pursuant to the Plan.





***Description
      of the China Health Holding, Inc. 2005 Incentive Stock Plan, as
      amended***





The
      2005
      Incentive Stock Plan has reserved 9,000,000 shares of common Stock for issuance.
      Under the 2005 Incentive Stock Plan, options may be granted which are intended
      to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal
      Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to
      qualify as Incentive Stock Options thereunder. In addition, direct grants of
      stock or restricted stock may be awarded.





***Purpose***





The
      primary purpose of the 2005 Incentive Stock Plan is to attract and retain the
      best available personnel in order to promote the success of our business and
      to
      facilitate the ownership of our stock by employees and others who provide
      services to us.





***Administration***





The
      2005
      Incentive Stock Plan is administered by our Board of Directors, as the Board
      of
      Directors may be composed from time to time. Notwithstanding the foregoing,
      the
      Board of Directors may at any time, or from time to time, appoint a committee
      of
      the Board of Directors, and delegate to the committee the authority of the
      Board
      of Directors to administer the 2005 Incentive Stock Plan. Upon such appointment
      and delegation, the committee shall have all the powers, privileges and duties
      of the Board of Directors, and shall be substituted for the Board of Directors,
      in the administration of the 2005 Incentive Stock Plan, subject to certain
      limitations.





***Eligibility***





Under
      the
      2005 Stock Incentive Plan, options may be granted to key employees, officers,
      directors or consultants of the Company, as provided in the 2005 Stock Incentive
      Plan.




***Terms
      of Options***





The
      term
      of each option granted under the 2005 Incentive Stock Plan shall be contained
      in
      a stock option agreement between the optionee and China Health Holdings, Inc.
      and such terms shall be determined by the Board of Directors consistent with
      the
      provisions of the 2005 Stock Incentive Plan, including the
      following:





(a)
      Purchase Price. The purchase price of the common stock subject to each incentive
      stock option shall not be less than the fair market value (as set forth in
      the
      2005 Incentive Stock Plan), or in the case of the grant of an incentive stock
      option to a principal stockholder, not less that 110% of fair market value
      of
      such common stock at the time such option is granted. The purchase price of
      the
      common stock subject to each non-incentive stock option shall be determined
      at
      the time such option is granted, but in no case less than 85% of the fair market
      value of such common stock at the time such option is granted.





(b)
      Vesting. The dates on which each option (or portion thereof) shall be
      exercisable and the conditions precedent to such exercise, if any, shall be
      fixed by the Board of Directors, in its discretion, at the time such option
      is
      granted. All options or grants which include a vesting schedule will vest in
      their entirety upon a change of control transaction as described in the 2005
      Incentive Stock Plan





(c)
      Expiration. The expiration of each option shall be fixed by the Board of
      Directors, in its discretion, at the time such option is granted; however,
      unless otherwise determined by the Board of Directors at the time such option
      is
      granted, an option shall be exercisable for ten years after the date on which
      it
      was granted, or five years for grants to certain executive officers. Each option
      shall be subject to earlier termination or repurchase as expressly provided
      in
      the 2005 Incentive Stock Plan or as determined by the Board of Directors, in
      its
      discretion, at the time such option is granted.




16





(d)
      Transferability. No option shall be transferable, except by will or the laws
      of
      descent and distribution, and any option may be exercised during the lifetime
      of
      the optionee only by such optionee. No option granted under the 2005 Incentive
      Stock Plan shall be subject to execution, attachment or other
      process.





(e)
      Option Adjustments. The aggregate number and class of shares as to which options
      may be granted under the 2005 Incentive Stock Plan, the number and class shares
      covered by each outstanding option and the exercise price per share thereof
      (but
      not the total price), and all such options, shall each be proportionately
      adjusted for any increase decrease in the number of issued common stock
      resulting from split-up spin-off or consolidation of shares or any like Capital
      adjustment or the payment of any stock dividend.





(f)
      Termination, Modification and Amendment. The 2005 Incentive Stock Plan (but
      not
      options previously granted under the plan) shall terminate ten years from the
      date of its adoption by the Board of Directors, and no option or shares shall
      be
      granted after termination of the 2005 Incentive Stock Plan. Subject to certain
      restrictions, the 2005 Incentive Stock Plan may at any time be terminated and
      from time to time be modified or amended by the affirmative vote of the holders
      of a majority of the outstanding shares of the capital stock of the China Health
      Holding, Inc. present, or represented, and entitled to vote at a meeting duly
      held in accordance with the applicable laws of the State of Nevada.




**Recent
      Sales of Unregistered Securities**





Year
      Ended December 31, 2007:





We
      sold
      the following equity securities As December 31, 2007, that were not registered
      under the Securities Act of 1933, as amended (the "Securities Act") as
      follows:





At
      various times during the year ended December 31, 2007 the Company issued
      35,376,400 shares of common stock for services rendered at an aggregate market
      value of $0.045 per share for a total value of $1,614,537.





At
      various times during the year ended December 31, 2007 the Company issued
      20,200,000 shares of common stock for acquisition deposits at an aggregate
      market value of $0.069 per share for a total value of $1,415,000. All these
      acquisition deposits have been expensed as of December 31, 2007 as the Company
      is unable to determine if any of these acquisitions can be
      consummated.





At
      various times during the year ended December 31, 2007 the Company issued
      5,400,000 shares of common stock for settlement of debt with an aggregate market
      value of $0.058 per share for a total value of $320,000. The Company recorded
      a
      gain on settlement of debt in the amount of $14,400.





At
      various times during the year ended December 31, 2007 the Company issued
      13,380,000 shares of common stock to cover loss for financing with an aggregate
      market value of $0.024 per share for a total value of $326,360.





At
      various times during the year ended December 31, 2007 the Company cancelled 1,496,400 shares
      of common stock and associated dividend with an aggregate market value of $0.00
      per share for a total value of $0.00.





**OPTIONS
      AND WARRANTS**





Year
      Ended December 31, 2007:





On
      June
      12, 2006, the Company increased the number of shares of common stock of the
      Company subject to the Company’s 2005 stock Incentive plan from 3,900,000 to
      9,000,000.





Year
      Ended December 31, 2007:




At
      various times during the year ended December 31, 2007 the Company granted
      warrants to various non-employee consultants, to purchase an aggregate of
      45,000,000 shares of the Company’s common stock at an aggregate exercise price
      of $0.20 expiring in an aggregate 5 years from the date of grant for services
      rendered.


These
      warrants were valued at aggregate of $2,876,277 using a Black-Scholes model
      with the following weighted average assumptions: dividend yield of 0%; expected
      volatility of 301%; risk-free interest rate of 4.85 %; an expected life of
      5
      years; stock trading price of $0.06 on the dates of grant. Some of these
      warrants were vested immediately upon grant, and accordingly were expensed
      immediately for a total expense of $2,876,277.




17




The
      fair
      value of the stock warrants
      thorough December 31 2007
      were estimated by application of the fair value method using Black Scholes warrants pricing
      model. Assumptions for Black Scholes used in this model were as summary as
      follows:





Risk-free
                interest rate
            
            
            4.85
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            301
            %




Year
      Ended December 31, 2006:




At
      various times during the year ended December 31, 2006 the Company granted
      warrants to various non-employee consultants, to purchase an aggregate of
      31,650,000 shares of the Company’s common stock at an aggregate exercise price
      of $0.15 expiring in an aggregate 2.65 years from the date of grant for services
      rendered. These warrants were valued at aggregate of $762,865 using a
      Black-Scholes model with the following weighted average assumptions: dividend
      yield of 0%; expected volatility of 269%; risk-free interest rate of 4.59%;
      an
      expected life of 2.65 years; Total unamortized deferred compensation expense
      for
      warrants granted in the year ended December 31, 2006 totaled $0.




·
            The
                fair value of the stock options during 2006 was estimated by application
                of the fair value method using Black Scholes option pricing model.
                Assumptions for Black Scholes used in this model were as summary
                as
                follows:




Risk-free
                interest rate
            
            
            4.85
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            280
            %




The
      following table summarized all warrants granted, exercised and expired in the
      years ended December 31, 2006 and 2007:





Shares
                underlying warrants
            
            Weighted
                average Exercise Price
            
            Shares
                underlying Options
            
            Weighted
                average Exercise Price
              OptionsOutstanding
                as of January 1, 2005
            
            
            1,180,000
            
            $
            0.75
            
            
            7,979,175
            
            $
            0.15Granted
            
            
            31,650,000
            
            
            0.15
            
            
            6,650,000
            
            
            0.20Exercised
            
            
            
            
            
            
            
            
            (300,000
            )
            
            0.20Expired
                or cancelled
            
            
            (1,080,000
            )
            
            0.75
            
            
            (1,600,000
            )
            
            0.15Outstanding
                as of December 31, 2006
            
            
            31,750,000
            
            
            0.15
            
            
            1,180,000
            
            
            0.19Granted
            
            
            45,000,000
            
            
            0.21
            
            
            -
            
            
            -Exercised
            
            
            
            
            
            
            
            
            -
            
            
            -Expired
                or cancelled
            
            
            (100,000
            )
            
            0.15
            
            
            (2,377,753
            )
            
            0.19Outstanding
                as of December 31, 2007
            
            
            74,650,000
            
            $
            0.19
            
            
            10,351,422
            
            $
            0.17




18





The
      following table summarizes information about stock warrants outstanding as
      of
      December 31, 2007.





Exercise
                Price
            
            Outstanding
              December
                31, 2007
            
            Weighted
                Average Remaining Life in Years
            
            Exercisable
              Warrants0.2
            
            
            250,000
            
            
            0.72
            
            
            250,0000.2
            
            
            500,000
            
            
            0.72
            
            
            500,0000.2
            
            
            1,000,000
            
            
            0.72
            
            
            1,000,0000.2
            
            
            400,000
            
            
            3.72
            
            
            400,0000.2
            
            
            1,500,000
            
            
            3.72
            
            
            1,500,0000.2
            
            
            6,000,000
            
            
            3.72
            
            
            6,000,0000.1
            
            
            10,000,000
            
            
            3.78
            
            
            10,000,0000.2
            
            
            10,000,000
            
            
            8.79
            
            
            10,000,0000.2
            
            
            4,000,000
            
            
            4.11
            
            
            4,000,0000.2
            
            
            1,000,000
            
            
            4.11
            
            
            1,000,0000.1
            
            
            10,000,000
            
            
            4.18
            
            
            10,000,0000.2
            
            
            10,000,000
            
            
            9.19
            
            
            10,000,0000.2
            
            
            1,000,000
            
            
            2.24
            
            
            1,000,0000.2
            
            
            1,000,000
            
            
            1.24
            
            
            1,000,0000.2
            
            
            1,000,000
            
            
            0.24
            
            
            1,000,0000.2
            
            
            1,000,000
            
            
            2.46
            
            
            1,000,0000.2
            
            
            1,000,000
            
            
            1.46
            
            
            1,000,0000.2
            
            
            1,000,000
            
            
            0.46
            
            
            1,000,0000.1
            
            
            1,000,000
            
            
            0.49
            
            
            1,000,0000.15
            
            
            1,000,000
            
            
            0.83
            
            
            1,000,0000.2
            
            
            1,000,000
            
            
            1.42
            
            
            1,000,0000.3
            
            
            1,000,000
            
            
            1.83
            
            
            1,000,0000.15
            
            
            5,000,000
            
            
            4.84
            
            
            5,000,0000.5
            
            
            5,000,000
            
            
            4.84
            
            
            5,000,0000.19
            
            
            74,650,000
            
            
            2.75
            
            
            74,650,000




The
      following table summarizes information about stock options outstanding as of
      December 31, 2007.




Exercise
                Price
            
            Outstanding
              December
                31, 2007
            
            Weighted
                Average Remaining Life in Years
            
            Exercisable
              Options0.10
            
            
            2,500,000
            
            
            1.42
            
            
            2,500,0000.05
            
            
            500,000
            
            
            0.33
            
            
            500,0000.10
            
            
            251,422
            
            
            1.46
            
            
            251,4220.30
            
            
            600,000
            
            
            1.46
            
            
            600,0000.20
            
            
            1,000,000
            
            
            0.09
            
            
            1,000,0000.20
            
            
            1,000,000
            
            
            0.07
            
            
            1,000,0000.20
            
            
            1,000,000
            
            
            1
            
            
            1,000,0000.20
            
            
            2,500,000
            
            
            3
            
            
            2,500,0000.20
            
            
            1,000,000
            
            
            0.09
            
            
            1,000,0000.17
            
            
            10,351,422
            
            
            1.325
            
            
            10,351,422




All
      of
      the foregoing issuances were exempt from registration under Section 4(2) of
      the
      Securities Act and/or Regulation S, promulgated pursuant to the Securities
      Act.
      None of the purchasers who received shares under Regulation S are U.S. persons
      as defined in Rule 902(k) of Regulation S, and no sales efforts were conducted
      in the U.S., in accordance with Rule 903(c). Such purchasers acknowledged that
      the securities purchased must come to rest outside the U.S., and the
      certificates contain a legend restricting the sale of such securities until
      the
      Regulation S holding period is satisfied.




19




**Item
      6. Management's Discussion and Analysis or Plan of Operation.**





**Forward-Looking
      Statements**





The
      information in this report contain forward-looking statements within the meaning
      of the Private Securities Litigation Reform Act of 1995. This Act provides
      a
      "safe harbor" for forward-looking statements to encourage companies to provide
      prospective information about themselves so long as they identify these
      statements as forward looking and provide meaningful cautionary statements
      identifying important factors that could cause actual results to differ from
      the
      projected results. All statements other than statements of historical fact
      made
      in this report are forward looking. In particular, the statements herein
      regarding industry prospects and future results of operations or financial
      position are forward-looking statements. Forward-looking statements reflect
      management's current expectations and are inherently uncertain. Our actual
      results may differ significantly from management's expectations.





**Background**




We
      are a
      development stage company, founded by our Chairman and Chief Executive Officer,
      Julianna Lu, in 2002 with the goal of becoming a leading manufacturer, marketer
      and distributor in the global natural medical and pharmaceutical industry.
      On
      April 3, 2002, we were incorporated under the laws of the State of Nevada under
      the name A E&E Pharma Corporation and changed our name on May 25, 2004, to
      China Health Holding, Inc. On May 1, 2007, we changed our name to China
      Holdings, Inc. Effective May 11, 2007, our stock trades under the symbol CHHL
      on
      the OTC Bulletin Board. The Company maintains a website at www.chinaholding.net .
      We have
      had nominal revenues since our inception.





We
      have
      three wholly-owned subsidiaries: (i) China Power, Inc. (ii)China Minerals
      HoldingsInc. and (iii) China Health Holdings, Inc.





On
      May 1,
      2007, our wholly owned subsidiary, China Health World Pharmaceutical
      Corporation, amended its Articles of Incorporation to change its name to China
      Health Holdings, Inc and on May 9, 2007, our wholly owned subsidiary China
      Health World Trade Corporation amended its Articles of Incorporation to change
      its name to China Power, Inc. On January 7, 2008, the Company incorporated
      3rd
      subsidiary: China Minerals Holdings, Inc. under Nevada State Laws.





Our
      initial business plan was to engage in the manufacturing, marketing and
      distribution of proprietary natural medicinal products. We have since revised
      our business plan to not only focus on the manufacture, marketing and
      distribution of natural medicinal products but to also focus on becoming a
      diversified global assets holding company. We and our subsidiaries intend to
      engage in multiple China-focused business activities including, energy,
      renewable energy resources, finance, real estate, utilities and
      pharmaceutical. Our objective is to achieve long-term capital appreciation
      through investment in companies and other entities with significant assets,
      investments, production activities, trading or other business interests in
      China, or/and worldwide, or/and which derive a significant part of their revenue
      from China, or/and worldwide.





***Subsidiary
      Operations Plans***




China
      Power intends to capture China's growing energy, renewable energy, and
      environment protection projects domestically and worldwide. China Power intends
      to engage in business activities and investments in hydropower plants, biomass
      energy projects and companies in China and throughout the world primarily
      through mergers and acquisitions, joint-venture partnerships with hydro-power
      plants, biomass energy projects and companies in China and throughout the world.
      China Power’s advanced hydro-power renewable energy strategy and plan is
      expected to improve the technical, societal, and environmental benefits of
      hydropower, biomass energy and to exploit investment and business opportunities
      in the cost-competitive hydropower and biomass energy industries in China and
      throughout the world, with a focus towards building long-term shareholder value.
      China Power intends to seek financing to fund its hydropower and biomass energy
      projects.  Financing transactions may include the issuance of equity
      or debt securities, obtaining credit facilities, or other financing mechanisms.
      There can be no assurance that we will be successful in obtaining
      financing.




China
      Minerals Holdings is a development - stage mining company, aiming to establish,
      expand, and diversify its presence in the mining resource industry in China
      throughout the world. China Minerals Holdings intends to focus on precious
      and
      rare metals resources, properties with mining licenses in production and joint
      venture opportunities.   Furthermore, China Mineral Holdings’ mining
      projects and prospects will be based on rigorous economic evaluation,
      independent advancement and joint-ventures.





China
      Health is a development stage company with the goal of becoming a leading
      developer, manufacturer, marketer and distributor of pharmaceutical drugs and
      dietary supplements in China and throughout the world. Its main objective is
      to
      partner with CHINA -SFDA approved drug producers, GMP certified manufacturing
      facilities, research and development centers and universities in China. China
      Health’s goals include the mergers and acquisitions with leading pharmaceutical
      companies in China. China Health’s strategy is to leverage synergies, integrate
      drug pipelines and distribution channels, and management expertise between
      pending pharmaceutical acquisitions. China Health intends to develop a Taoist
      Medicine product line and a Vitamins and Supplements product line. All of the
      products for these product lines are fully developed and China Health expects
      to
      launch the Taoist Medicine and Vitamins and Supplements product lines. All
      of
      China Health’s manufacturing will be outsourced to third parties. China Health
      plans to generate revenues by sales of its herbal supplement products (1)
      through a website that is currently under construction, (2) through retail
      and
      wholesale distributors, and (3) through the establishment of retail stores
      in
      major cities in North America. While in the past China Health’s current
      operations and sales were in Canada, China Health anticipates expanding its
      sales into the U.S. over the next six to twelve months and, thereafter, into
      regions of Europe and Asia.




20




**RESULTS
        OF OPERATIONS**
  **Year
        Ended December 31, 2007 Compared to Year Ended December 31,
        2006**
  We
        had a net loss of $7,604,072 for the year ended December 31, 2007 as compared
        to
        a net loss of $ 3,197,076 for the year ended December 31 2006. The net loss
        for
        the year ended December 31, 2007 consisted primarily of $1,415,000 of
        Acquisition Payments, $1,259,294 of consulting fees, $ 1,159,288 of management
        fees, $ 244,629 of professional fees, $ 102,805 of interest and bank charges,
        $
        28,310 in rent, $ 13,888 of travel expenses, $16,338 of office expenses,
        $
        162,194 of investor relations, $3,448 in depreciation expenses, $ 45,438
        of
        advertising and promotional expenses, and $5,258 of vehicle expenses. The
        increase in net loss for the year ended December 31, 2007 was the result
        of the
        increase acquisition payments of $ 0 for the year ended December 31, 2006
        as
        compared to $1,415,000 in 2007. the increase consulting fees of $ 1,018,937
        for
        the year ended December 31, 2006 as compared to $ $1,259,294 in 2007. the
        increase management fees of $ 1,004,948for the year ended December 31, 2006
        as
        compared to $ 1,159,288 in 2007.
 
 Other
        Income (Expenses) was -$3,148,183 for the year ended December 31, 2007 as
        compared to -$582,567 for the year ended December 31, 2006. The decrease
        is
        attributed primarily to a gain on settlement of debts through issuance of
        stock
        of $14,400 and stock based compensation of $3,166,637 for the year ended
        December 31, 2007 compared to a loss of $167,156 on settlements of debt and
        $762,865 for compensation of Stock for the year ended December 31, 2006.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
  As
        of
        December 31, 2007, we had cash of $9,958. Our current liabilities as of December
        31, 2007 aggregated $1,344,042. As of December 31, 2007, we had a working
        capital deficiency of $1,315,737 and an accumulated deficit of $16,797,449.
        To
        date, our operations have been funded through advances from our Chief Executive
        Officer, Julianna Lu and through issuances of shares of our common stock.
  As
        of
        December 31, 2007, we had outstanding loans to our CEO, Julianna Lu, in the
        amount of $ 973,719, Vice President, XiaoFei Yu, in the amount of $
        297,484, Compare to December 31, 2006, we had outstanding loans to our CEO,
        Julianna Lu, in the amount of $700,184, Vice President, XiaoFei Yu, in the
        amount of $144,859 and to James Simpson, one of the Company's consultant,
        in the
        amount of $30,123. There are no formal agreements for when repayment of the
        loans must be made. The loans accrue interest at the rate of 10% per
        annum.
  While
        we
        have raised capital to meet our working capital and financing needs in the
        past,
        additional financing is required within the next 12 months in order to meet
        our
        current and projected cash flow deficits from operations and development.
        We
        have sufficient funds to conduct our operations for several months, but not
        for
        12 months or more. Further, in order to expand our business, fund future
        development and begin marketing and selling our three product lines and pursue
        our acquisition strategy, we will need to raise at least $25 million over
        the
        next twelve to twenty-four months. There can be no assurance that financing
        will
        be available in amounts or on terms acceptable to us, if at
        all.





By
      adjusting our operations and development to the level of capitalization, we
      believe we have sufficient capital resources to meet projected cash flow
      deficits. However, if during that period or thereafter, we are not successful
      in
      generating sufficient liquidity from operations or in raising sufficient capital
      resources, on terms acceptable to us, this could have a material adverse effect
      on our business, results of operations liquidity and financial
      condition.





Our
      registered independent certified public accountants have stated in their report
      that we have incurred operating losses in the last two years, and that we are
      dependent upon management's ability to develop profitable operations. These
      factors among others may raise substantial doubt about our ability to continue
      as a going concern.





We
      presently do not have any available credit, bank financing or other external
      sources of liquidity. Due to our brief history and historical operating losses,
      our operations have not been a source of liquidity. We will need to obtain
      additional capital in order to expand operations and become profitable. We
      intend to pursue the building of a re-seller network outside the United States,
      and if successful, the re-seller agreements would constitute a source of
      liquidity and capital over time. In order to obtain capital, we may need to
      sell
      additional shares of our common stock or borrow funds from private lenders.
      There can be no assurance that we will be successful in obtaining additional
      funding and execution of re-seller agreements outside the Unites
      States.




21




We
      will
      still need additional investments in order to continue operations to cash flow
      break even. Additional investments are being sought, but we cannot guarantee
      that we will be able to obtain such investments. Financing transactions may
      include the issuance of equity or debt securities, obtaining credit facilities,
      or other financing mechanisms. However, the trading price of our common stock
      and the downturn in the U.S. stock and debt markets could make it more difficult
      to obtain financing through the issuance of equity or debt securities. Even
      if
      we are able to raise the funds required, it is possible that we could incur
      unexpected costs and expenses, fail to collect significant amounts owed to
      us,
      or experience unexpected cash requirements that would force us to seek
      alternative financing. Further, if we issue additional equity or debt
      securities, stockholders may experience additional dilution or the new equity
      securities may have rights, preferences or privileges senior to those of
      existing holders of our common stock. If additional financing is not available
      or is not available on acceptable terms, we will have to curtail our
      operations.





These
      conditions raise substantial doubt about our ability to continue as a going
      concern.





**Critical
      Accounting Policies and Estimates**





We
      have
      identified one policy area as critical to the understanding of our consolidated
      financial statements. The preparation of our consolidated financial statements
      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 consolidated financial statements. In particular,
      management makes estimates concerning the valuation of stock based transactions.
      Stock based transactions include issuance of stock for services and for
      intangible assets such as technologies or licenses. Stock based transactions
      also include issuance of stock options and warrants for services and
      intangibles.





We
      suggest that our significant accounting policies, as described in our
      consolidated financial statements in the Summary of Significant Accounting
      Policies, be read in conjunction with this Management's discussion and Analysis
      of Financial Condition and Results of Operations.





SFAS
      No.
      159. In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” SFAS 159 permits entities to choose
      to measure many financial instruments, and certain other items, at fair value.
      SFAS 159 applies to reporting periods beginning after November 15, 2007. The
      adoption of SFAS 159 is not expected to have a material impact on the Company's
      financial condition or results of operations.




In
      June
      2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB
      Statements No. 109”. FIN 48 clarifies the accounting for uncertainty in income
      taxes by prescribing a two-step method of first evaluating whether a tax
      position has met a more likely than not recognition threshold and second,
      measuring that tax position to determine the amount of benefit to be recognized
      in the financial statements. FIN 48 provides guidance on the presentation of
      such positions within a classified statement of financial position as well
      as on
      derecognition, interest and penalties, accounting in interim periods,
      disclosure, and transition. FIN 48 is effective for fiscal years beginning
      after
      December 15, 2006. The adoption of this statement is not expected to have a
      material effect on the Company's future reported financial position or results
      of operations.




**Recently
      Issued Accounting Pronouncements**





*
      In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
      (“SFAS 157”). SFAS No. 157 defines fair value, establishes a framework for
      measuring fair value in accordance with generally accepted accounting
      principles, and expands disclosures about fair value measurements. This
      statement does not require any new fair value measurements; rather, it applies
      under other accounting pronouncements that require or permit fair value
      measurements. The provisions of this statement are to be applied prospectively
      as of the beginning of the fiscal year in which this statement is initially
      applied, with any transition adjustment recognized as a cumulative-effect
      adjustment to the opening balance of retained earnings. The provisions of SFAS
      157 are effective for the fiscal years beginning after November 15, 2007.
      Therefore, the Company anticipates adopting this standard as of January 1,
      2008. Management has not determined the effect, if any, the adoption of this
      statement will have on the Company’s financial condition or results of
      operations.





*
      In
      September 2006, the FASB issued Statement No. 158, *“Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans”* (“SFAS No. 158”), an amendment of FASB Statements No. 87, 88, 106
      and 132(R). SFAS No. 158 requires (a) recognition of the funded
      status (measured as the difference between the fair value of the plan assets
      and
      the benefit obligation) of a benefit plan as an asset or liability in the
      employer’s statement of financial position, (b) measurement of the funded
      status as of the employer’s fiscal year-end with limited exceptions, and
      (c) recognition of changes in the funded status in the year in which the
      changes occur through comprehensive income. The requirement to recognize the
      funded status of a benefit plan and the disclosure requirements are effective
      as
      of the end of the fiscal year ending after December 15, 2006. The
      requirement to measure the plan assets and benefit obligations as of the date
      of
      the employer’s fiscal year-end statement of financial position is effective for
      fiscal years ending after December 15, 2008. This Statement has no current
      applicability to the Company’s financial statements. Management does not expect
      the adoption of SFAS No. 158 to have a material impact on the
      Company’s future financial position, results of operations, or cash
      flows. ****




22




***** In
      February 2007, the FASB issued Statement No. 159 “The Fair Value Option for
      Financial Assets and Financial Liabilities” (SFAS 159). This statement permits
      companies to choose to measure many financial assets and liabilities at fair
      value. Unrealized gains and losses on items for which the fair value option
      has
      been elected are reported in earnings. SFAS 159 is effective for fiscal years
      beginning after November 15, 2007. The Company is currently assessing the impact
      of SFAS 159 on its consolidated financial statements.





*
      In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS 141(R)”). SFAS 141(R) will change the accounting for
      business combinations. Under SFAS No. 141(R), an acquiring entity will be
      required to recognize all the assets acquired and liabilities assumed in a
      transaction at the acquisition-date fair value with limited exceptions. SFAS
      No. 141(R) will change the accounting treatment and disclosure for certain
      specific items in a business combination. SFAS No. 141(R) applies
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. SFAS 141(R) will impact the Company in the event of any
      future acquisition.





*
      In
      December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
      Consolidated Financial Statements—an amendment of Accounting Research Bulletin
      No. 51” (“SFAS 160”). SFAS 160 establishes new accounting and reporting
      standards for the non-controlling interest in a subsidiary and for the
      deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years
      beginning on or after December 15, 2008. The Company does not believe that
      SFAS 160 will have a material impact on its consolidated financial
      statements.





*
      In
      March 2008, the FASB issued SFAS No. 161, “Disclosures about
      Derivative Instruments and Hedging Activities—an amendment of FASB Statement
      No. 133” (“FAS 161”). FAS 161 changes the disclosure requirements for
      derivative instruments and hedging activities. Entities are required to provide
      enhanced disclosures about (a) how and why an entity uses derivative
      instruments, (b) how derivative instruments and related hedged items are
      accounted for under Statement 133 and its related interpretations, and
      (c) how derivative instruments and related hedged items affect an entity’s
      financial position, financial performance, and cash flows. The guidance in
      FAS
      161 is effective for financial statements issued for fiscal years and interim
      periods beginning after November 15, 2008, with early application
      encouraged. This Statement encourages, but does not require, comparative
      disclosures for earlier periods at initial adoption. The Company is currently
      assessing the impact of FAS 161.





**Critical
      Accounting Policies and Estimates**




*Marketable
      Securities*





We
      classify our existing investments in marketable securities held  for
      sale and investments in marketable securities held for sale-related party in
      accordance with SFAS No. 115. Investments in marketable securities held for
      sale
      and investments in marketable securities held for sale-related party consist
      of
      marketable securities, and are stated at fair value. Unrealized gains or losses
      on marketable securities held for sale and unrealized gains or losses on
      marketable securities held for sale-related party are recognized as an element
      of comprehensive income in our operations on a monthly basis based on
      fluctuations in the fair value of the security as quoted on national or
      inter-dealer stock exchanges. Realized gains or losses on marketable securities
      held for sale and realized gains or losses on marketable securities held for
      sale-related party are recognized in the consolidated statement of operations
      as
      trading profits when securities are sold.





We
      receive securities, which include common stock from clients as part of our
      compensation for services. These securities are stated at their fair value
      in
      accordance with SFAS #115 "Accounting for certain investments in debt and equity
      securities", and EITF 00-8 "Accounting by a grantee for an equity instrument
      to
      be received in conjunction with providing goods or services". All of the
      securities are received from companies whose common stock is listed either
      on
      the over the counter bulletin board or pinks sheets. The common stock and the
      common stock purchase warrants received as compensation are typically restricted
      as to resale. Our policy is to sell securities we receive as compensation when
      permitted, rather than hold on to these securities as long term investments,
      regardless of market conditions in an effort to satisfy our current obligations.
      As these securities are often restricted, we are unable to liquidate these
      securities until the restriction is removed. We recognize revenue for such
      common stock based on the fair value at the time common stock is granted and
      for
      common stock purchase warrants based on the Black-Scholes valuation model.
      Unrealized gains or losses on marketable securities held for sale and unrealized
      gains or losses on marketable securities held for sale-related party are
      recognized as an element of comprehensive income in our consolidated statement
      of operations on a monthly basis based on changes in the fair value of the
      security as quoted on national or inter-dealer stock exchanges. Once liquidated,
      realized gains or losses on the sale of marketable securities held for sale
      and
      realized gains or losses on the sale of marketable securities held for
      sale-related party will be reflected in our net income for the period in which
      the security was liquidated.




23




*Stock
      Based Compensation*





In
      December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment", which
      replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R),
      companies are required to measure the compensation costs of share based
      compensation arrangements based on the grant date fair value and recognize
      the
      costs in the financial statements over the period during which employees are
      required to provide services. Share based compensation arrangements include
      stock options, restricted share plans, performance based awards, share
      appreciation rights and employee share purchase plans. In March 2005 the SEC
      issued Staff Accounting Bulletin No. 107, or "SAB 107". SAB 107 expresses views
      of the staff regarding the interaction between SFAS No. 123(R) and certain
      SEC
      rules and regulations and provides the staff's views regarding the valuation of
      share based payment arrangements for public companies. SFAS No. 123(R) permits
      public companies to adopt its requirements using one of two methods. On April
      14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS
      123R. Companies may elect to apply this statement either prospectively, or
      on a
      modified version of retrospective application under which financial statements
      for prior periods are adjusted on a basis consistent with the pro forma
      disclosures required for those periods under SFAS 123. Effective January 1,
      2006, we fully adopted the provisions of SFAS No. 123R and related
      interpretations as provided by SAB 107. As such, compensation cost is measured
      on the date of grant as the excess of the current market price of the underlying
      stock over the exercise price. Such compensation amounts, if any, are amortized
      over the respective vesting periods of the option grant.




**Inflation**




It
      is our
      opinion that inflation has not had a material effect on our
      operations.





**Off-Balance
      Sheet Arrangements**




We
      do not
      have any off-balance sheet arrangements.





**Certain
      Risks and Uncertainties**




Certain
      statements in this Annual Report on Form 10-KSB, including certain statements
      contained in “Description of Business” and “Management’s Discussion and
      Analysis,” constitute “forward-looking statements” within the meaning of Section
      27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
      Exchange Act of 1934, as amended. The words or phrases “can be,” “may,” “could,”
“would,” “expects,” “believes,” “seeks,” “estimates,” “projects” and similar
      words and phrases are intended to identify such forward-looking statements.
      Such
      forward-looking statements are subject to various known and unknown risks and
      uncertainties, including those described on the following pages, and we caution
      you that any forward-looking information provided by or on behalf of us is
      not a
      guarantee of future performance. Our actual results could differ materially
      from
      those anticipated by such forward-looking statements due to a number of factors,
      some of which are beyond our control. All such forward-looking statements are
      current only as of the date on which such statements were made. We do not
      undertake any obligation to publicly update any forward-looking statement to
      reflect events or circumstances after the date on which any such statement
      is
      made or to reflect the occurrence of unanticipated events.




***RISK
      FACTORS*** **





*Certain
      statements in this Annual Report on Form 10-KSB, including certain statements
      contained in “Description of Business” and “Management’s Discussion and
      Analysis,” constitute “forward-looking statements” within the meaning of Section
      27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
      Exchange Act of 1934, as amended. The words or phrases “can be,” “may,” “could,”
“would,” “expects,” “believes,” “seeks,” “estimates,” “projects” and similar
      words and phrases are intended to identify such forward-looking statements.
      Such
      forward-looking statements are subject to various known and unknown risks and
      uncertainties, including those described on the following pages, and we caution
      you that any forward-looking information provided by or on behalf of us is
      not a
      guarantee of future performance. Our actual results could differ materially
      from
      those anticipated by such forward-looking statements due to a number of factors,
      some of which are beyond our control. All such forward-looking statements are
      current only as of the date on which such statements were made. We do not
      undertake any obligation to publicly update any forward-looking statement to
      reflect events or circumstances after the date on which any such statement
      is
      made or to reflect the occurrence of unanticipated events.*




***Risks
      Related to Doing Business in the People’s Republic of
      China***




***We
      face the risk that changes in the policies of the government of the People’s
      Republic of China could have a significant impact upon our business and
      profitability.***




The
      economy of the People’s Republic of China is in a transition from a planned
      economy to a market oriented economy subject to five-year and annual plans
      adopted by the government that set national economic development goals. Policies
      of the People’s Republic of China can have significant effects on the economic
      conditions of the People’s Republic of China. The government of the People’s
      Republic of China has confirmed that economic development will follow the model
      of a market economy. Under this direction, we believe that the People’s Republic
      of China will continue to strengthen its economic and trading relationships
      with
      foreign countries and business development in the People’s Republic of China
      will follow market forces. While we believe that this trend will continue,
      there
      can be no assurance that this will be the case. A change in policies by the
      government of the People’s Republic of China could adversely affect our
      interests by, among other factors:




·
              
              changes
                  in laws,
  24
  ·
              
              imposition
                  of new regulations or the interpretations of such
                  regulations,·
              
              confiscatory
                  taxation,·
              
              restrictions
                  on currency conversion, imports or sources of supplies,
                  or·
              
              the
                  expropriation or nationalization of private
                  enterprises.




Although
      the government of the People’s Republic of China has been pursuing economic
      reform policies for more than two decades, there is no assurance that the
      government will continue to pursue such policies or that such policies may
      not
      be significantly altered, especially in the event of a change in leadership,
      social or political disruption, or other circumstances affecting political,
      economic and social life in the People’s Republic of China.




***The
      laws and regulations of the People’s Republic of China governing our current
      business operations are sometimes vague and uncertain. Any changes in these
      laws
      and regulations may have a material and adverse effect on our
      business.***




There
      are
      substantial uncertainties regarding the interpretation and application of laws
      and regulations of the People’s Republic of China, including but not limited to,
      the laws and regulations governing our business, or the enforcement and
      performance of our arrangements with customers in the event of the imposition
      of
      statutory liens, death, bankruptcy and criminal proceedings. The laws and
      regulations are sometimes vague and may be subject to future changes, and their
      official interpretation and enforcement may involve substantial uncertainty.
      The
      effectiveness of newly enacted laws, regulations or amendments may be delayed,
      resulting in detrimental reliance by foreign investors. New laws and regulations
      that affect existing and proposed future businesses may also be applied
      retroactively. We cannot predict what effect the interpretation of existing
      or
      new laws or regulations of the People’s Republic of China may have on our
      businesses.




***A
      slowdown or other adverse developments in the economy of the People’s Republic
      of China may materially and adversely affect our customers, demand for our
      products and our business.***




Much
      of
      our operations are conducted in the People’s Republic of China. Although the
      economy of the People’s Republic of China has grown significantly in recent
      years, we cannot assure investors that such growth will continue. The renewable
      energy industry in the People’s Republic of China is relatively new and growing,
      and we therefore do not know how sensitive it is to a slowdown in economic
      growth or other adverse changes in the economy of the People’s Republic of
      China. A slowdown in overall economic growth, an economic downturn or recession
      or other adverse economic developments in the People’s Republic of China could
      materially reduce the demand for our products and materially and adversely
      affect our business.




***Inflation
      in the People’s Republic of China could negatively affect our profitability and
      growth.***




While
      the
      People’s Republic of China economy has experienced rapid growth, such growth has
      been uneven among various sectors of the economy and in different geographical
      areas of the country. Rapid economic growth can lead to growth in the money
      supply and rising inflation. If prices for our products rise at a rate that
      is
      insufficient to compensate for the rise in the costs of supplies, it may have
      an
      adverse effect on profitability. In order to control inflation in the past,
      the
      People’s Republic of China has imposed controls on bank credits, limits on loans
      for fixed assets and restrictions on state bank lending. Such an austere policy
      can lead to a slowing of economic growth. On October 28, 2004, the People’s Bank
      of China, the People’s Republic of China’s central bank, raised interest rates
      for the first time in nearly a decade and indicated in a statement that the
      measure was prompted by inflationary concerns. Repeated rises in interest rates
      by the central bank would likely slow economic activity in the People’s Republic
      of China, which could, in turn, materially increase our costs and also reduce
      demand for our products.




***Any
      recurrence of severe acute respiratory syndrome, or SARS, or another widespread
      public health problem, could adversely affect our
      operations.***




A
      renewed
      outbreak of SARS or another widespread public health problem in the People’s
      Republic of China, where much of our revenue is derived, could have an adverse
      effect on our operations. Our operations may be impacted by a number of
      health-related factors, including quarantines or closures of some of our offices
      that would adversely disrupt our operations. Any of the foregoing events or
      other unforeseen consequences of public health problems could adversely affect
      our operations.




Because
      our principal assets are located outside of the U.S. and all of our directors
      and officers reside outside of the U.S., it may be difficult for investors
      to
      enforce their rights based on U.S. federal securities laws against us and our
      officers and directors in the U.S. or to enforce a U.S. court judgment against
      us or them in the People’s Republic of China.




25




All
      of
      our directors and officers reside outside of the U.S. In addition, Fujian
      Zhongde Technology Co., Ltd. and Fujian Zhongde Energy Co., Ltd., our operating
      subsidiaries, are located in the People’s Republic of China and substantially
      all of their assets are located outside of the U.S. It may therefore be
      difficult or impossible for investors in the U.S. to enforce their legal rights
      based on the civil liability provisions of the U.S. federal securities laws
      against us in the courts of either the U.S. or the People’s Republic of China
      and, even if civil judgments are obtained in U.S. courts, to enforce such
      judgments in the People’s Republic of China courts. Further, it is unclear if
      extradition treaties now in effect between the U.S. and the People’s Republic of
      China would permit effective enforcement against us or our officers and
      directors of criminal penalties, under the U.S. federal securities laws or
      otherwise.





***We
      may have difficulty establishing adequate management, legal and financial
      controls in the People’s Republic of China.***




The
      People’s Republic of China historically has not adopted a western style of
      management and financial reporting concepts and practices, as well as in modern
      banking, computer and other control systems. We may have difficulty in hiring
      and retaining a sufficient number of qualified employees to work in the People’s
      Republic of China. As a result of these factors, we may experience difficulty
      in
      establishing management, legal and financial controls, collecting financial
      data
      and preparing financial statements, books of account and corporate records
      and
      instituting business practices that meet western standards.





***The
      legal system in China has inherent uncertainties that may limit the legal
      protections available in the event of any claims or disputes with third
      parties.***





The
      legal
      system in China is based on written statutes. Prior court decisions may be
      cited
      for reference but have limited precedential value. Since 1979, the central
      government has promulgated laws and regulations dealing with economic matters
      such as foreign investment, corporate organization and governance, commerce,
      taxation and trade. As China’s foreign investment laws and regulations are
      relatively new and the legal system is still evolving, the interpretation of
      many laws, regulations and rules is not always uniform and enforcement of these
      laws, regulations and rules involve uncertainties, which may limit the remedies
      available in the event of any claims or disputes with third parties. In
      addition, any litigation in China may be protracted and result in substantial
      costs and diversion of resources and management attention.




***Restrictions
      on currency exchange may limit our ability to receive and use our revenues
      effectively.***





Because
      a
      substantial portion of revenues in future periods will be in the form of
      Renminbi, any future restrictions on currency exchanges may limit our ability
      to
      use revenue generated in Renminbi to fund any future business activities outside
      China or to make dividend or other payments in U.S. dollars. Although the
      Chinese government introduced regulations in 1996 to allow greater
      convertibility of the Renminbi for current account transactions, significant
      restrictions still remain, including primarily the restriction that
      foreign-invested enterprises may only buy, sell or remit foreign currencies,
      after providing valid commercial documents, at those banks authorized to conduct
      foreign exchange business. In addition, conversion of Renminbi for capital
      account items, including direct investment and loans, is subject to government
      approval in China, and companies are required to open and maintain separate
      foreign exchange accounts for capital account items. We cannot be certain that
      the Chinese regulatory authorities will not impose more stringent restrictions
      on the convertibility of the Renminbi, especially with respect to foreign
      exchange transactions.





***We
      may be unable to enforce our rights due to policies regarding the regulation
      of
      foreign investments in China.***





China’s
      legal system is a civil law system based on written statutes in which decided
      legal cases have little value as precedents, unlike the common law system
      prevalent in the United States. China does not have a well-developed,
      consolidated body of laws governing foreign investment enterprises. As a result,
      the administration of laws and regulations by government agencies may be subject
      to considerable discretion and variation, and may be subject to influence by
      external forces unrelated to the legal merits of a particular matter. China's
      regulations and policies with respect to foreign investments are evolving.
      Definitive regulations and policies with respect to such matters as the
      permissible percentage of foreign investment and permissible rates of equity
      returns have not yet been published. Statements regarding these evolving
      policies have been conflicting and any such policies, as administered, are
      likely to be subject to broad interpretation and discretion and to be modified,
      perhaps on a case-by-case basis. The uncertainties regarding such regulations
      and policies present risks which may affect our ability to achieve our stated
      business objectives. If we are unable to enforce any legal rights we may have
      under our contracts or otherwise, our ability to compete with other companies
      in
      our industry could be limited which could result in a loss of revenue in future
      periods which could impact our ability to continue as a going
      concern.





***Recent
      regulations relating to acquisitions of Chinese companies by foreign entities
      may create regulatory uncertainties that could restrict or limit our ability
      to
      operate, including our ability to pay dividends.***





The
      State
      Administration of Foreign Exchange, or SAFE, issued a public notice in January
      2005 concerning foreign exchange regulations on mergers and acquisitions in
      China. The public notice states that if an offshore company controlled by
      Chinese residents intends to acquire a Chinese company, such acquisition will
      be
      subject to strict examination by the relevant foreign exchange authorities.
      The
      public notice also states that the approval of the relevant foreign exchange
      authorities is required for any sale or transfer by the Chinese residents of
      a
      Chinese company's assets or equity interests to foreign entities for equity
      interests or assets of the foreign entities.




26




In
      April
      2005, SAFE issued another public notice further explaining the January notice.
      In accordance with the April 2005 notice, if an acquisition of a Chinese company
      by an offshore company controlled by Chinese residents has been confirmed by
      a
      Foreign Investment Enterprise Certificate prior to the promulgation of the
      January 2005 notice, the Chinese residents must each submit a registration
      form
      to the local SAFE branch with respect to their respective ownership interests
      in
      the offshore company, and must also file an amendment to such registration
      if
      the offshore company experiences material events, such as changes in the share
      capital, share transfer, mergers and acquisitions, spin-off transaction or
      use
      of assets in China to guarantee offshore obligations. The April 2005 notice
      also
      provides that failure to comply with the registration procedures set forth
      therein may result in restrictions on our Chinese resident shareholders and
      our
      subsidiaries. Pending the promulgation of detailed implementation rules, the
      relevant government authorities are reluctant to commence processing any
      registration or application for approval required under the SAFE
      notices.





In
      addition, on August 8, 2006, the Ministry of Commerce ("MOFCOM"), joined by
      the
      State-Owned Assets Supervision and Administration Commission of the State
      Council, State Administration of Taxation, State Administration for Industry
      and
      Commerce, China Securities Regulatory Commission and SAFE, amended and released
      the Provisions for Foreign Investors to Merge and Acquire Domestic Enterprises,
      new foreign-investment rules which took effect September 8, 2006, superseding
      much, but not all, of the guidance in the prior SAFE circulars. These new rules
      significantly revise China's regulatory framework governing onshore-offshore
      restructurings and how foreign investors can acquire domestic enterprises.
      These
      new rules signify greater Chinese government attention to cross-border merger,
      acquisition and other investment activities, by confirming MOFCOM as a key
      regulator for issues related to mergers and acquisitions in China and requiring
      MOFCOM approval of a broad range of merger, acquisition and investment
      transactions. Further, the new rules establish reporting requirements for
      acquisition of control by foreigners of companies in key industries, and
      reinforce the ability of the Chinese government to monitor and prohibit foreign
      control transactions in key industries.





These
      new
      rules may significantly affect the means by which offshore-onshore
      restructurings are undertaken in China in connection with offshore private
      equity and venture capital financings, mergers and acquisitions. It is expected
      that such transactional activity in China in the near future will require
      significant case-by-case guidance from MOFCOM and other government authorities
      as appropriate. It is anticipated that application of the new rules will be
      subject to significant administrative interpretation, and we will need to
      closely monitor how MOFCOM and other ministries apply the rules to ensure its
      domestic and offshore activities continue to comply with Chinese law. Given
      the
      uncertainties regarding interpretation and application of the new rules, we
      may
      need to expend significant time and resources to maintain
      compliance.





It
      is
      uncertain how our business operations or future strategy will be affected by
      the
      interpretations and implementation of the SAFE notices and new rules. Our
      business operations or future strategy could be adversely affected by the SAFE
      notices and the new rules. For example, we may be subject to more stringent
      review and approval process with respect to our foreign exchange
      activities.




***Revised
      tax structure proposed by the National People’s Congress could have a material
      impact on our performance.***





On
      December 24, 2006, the Chinese government officially submitted a draft of the
      new Enterprise Income Tax Law which seeks to unify China's dual tax system.
      Presently China has a dual tax policy with different rates of taxation for
      domestic enterprises as opposed to foreign investment enterprises. The new
      unified tax rate is proposed to be 25% for all entities, which is higher than
      the 15% rate currently applied to foreign investment entities. However low
      profit enterprises, whether foreign investment enterprises or domestic
      enterprises, may be subject to a lower tax rate of 20%. It is uncertain how
      this
      new policy, if adopted, would impact our subsidiaries, as all the components
      of
      the revised policy have not been determined.





***Failure
      to comply with the United States foreign corrupt practices act could subject
      us
      to penalties and other adverse consequences.***





We
      are
      subject to the United States Foreign Corrupt Practices Act, which generally
      prohibits United States companies from engaging in bribery or other prohibited
      payments to foreign officials for the purpose of obtaining or retaining
      business. Corruption, extortion, bribery, pay-offs, theft and other fraudulent
      practices occur from time-to-time in China. We can make no assurance, however,
      that our employees or other agents will not engage in such conduct for which
      we
      might be held responsible. If our employees or other agents are found to have
      engaged in such practices, we could suffer severe penalties and other
      consequences that may have a material adverse effect on our business, financial
      condition and results of operations.





***Risks
      Related to our Company***




***We
      have limited history of operations and we cannot assure you that our business
      model will be successful in the future or that our operations will be
      profitable.***





We
      began
      operations in 2002 and commenced trading as a public company on the OTC Bulletin
      Board in the middle of 2005. Our operating results for future periods will
      include significant expenses, including mergers and acquisition, marketing
      costs, and administrative and general overhead expenses as we implement our
      business model to expand our operations. As a result, we are unable to predict
      whether we will report profitable operations in the future. There can be no
      assurances whatsoever that we will be able to successfully implement our
      business model, identify and close acquisitions of operating companies,
      penetrate our target markets or attain a wide following for our services. We
      are
      subject to all the risks inherent in an early stage enterprise which has
      experienced rapid growth through acquisitions and our prospects must be
      considered in light of the numerous risks, expenses, delays, problems and
      difficulties frequently encountered in those businesses.




27




***The
      success of our business model is dependent upon our ability to identify and
      close acquisitions of operating companies in China. The acquisition of new
      businesses is costly and such acquisitions may not enhance our financial
      condition.***





Our
      primary business strategy is to acquire companies and identify and acquire
      assets and technologies from businesses in China that have services, products,
      technologies, industry specializations or geographic coverage that extend or
      complement our existing business. The process to undertake a potential
      acquisition is time-consuming and costly. We expect to expend significant
      resources to undertake business, financial and legal due diligence on our
      potential acquisition targets, and there is no guarantee that we will acquire
      the company after completing due diligence. The process of identifying and
      consummating an acquisition could result in the use of substantial amounts
      of
      cash, potentially dilutive issuances of equity securities and exposure to
      undisclosed or potential liabilities of acquired companies. We have not
      consummated any acquisitions at this time and there can be no assurance that
      the
      addition of targeted businesses will enhance shareholder value.





***Acquisition
      efforts in future periods may be dilutive to our then current
      stockholders.***





Our
      business model depends upon the issuance of our securities to consummate
      acquisitions in the future. As a result, the percentage ownership of our company
      held by existing stockholders will be reduced and those stockholders may
      experience significant dilution. In addition, new securities may contain certain
      rights, preferences or privileges that are senior to those of our common stock.
      As we will generally not be required to obtain the consent of our stockholders
      before entering into acquisition transactions, stockholders are dependent upon
      the judgment of our management in determining the number of, and characteristics
      of stock issued as consideration in an acquisition.





***We
      will need additional financing which we may not be able to obtain on acceptable
      terms. Additional capital raising efforts in future periods may be dilutive
      to
      our then current stockholders or result in increased interest expense in future
      periods.***





We
      will
      need to raise additional working capital to continue to implement our business
      model. While our business model contemplates the potential for the issuance
      of
      equity securities for the stock of acquired companies, capital may be needed
      for
      the acquisition of these companies. Capital will also be needed for the
      effective integration, operation and expansion of these businesses. Our future
      capital requirements, however, depend on a number of factors, including our
      operations, the financial condition of an acquisition target and its needs
      for
      capital, our ability to grow revenues from other sources, our ability to manage
      the growth of our business and our ability to control our expenses. If we raise
      additional capital through the issuance of debt, this will result in increased
      interest expense. If we raise additional funds through the issuance of equity
      or
      convertible debt securities, the percentage ownership of our company held by
      existing stockholders will be reduced and those stockholders may experience
      significant dilution. In addition, new securities may contain certain rights,
      preferences or privileges that are senior to those of our common stock. We
      cannot assure you that we will be able to raise the working capital as needed
      in
      the future on terms acceptable to us, if at all. If we do not raise funds as
      needed, we will be unable to fully implement our business model, fund our
      ongoing operations or grow our company.





***Our
      management may be unable to effectively integrate our acquisitions and to manage
      our growth and we may be unable to fully realize any anticipated benefits of
      these acquisitions.***





We
      are
      subject to various risks associated with our growth strategy, including the
      risk
      that we will be unable to identify and recruit suitable acquisition candidates
      in the future or to integrate and manage the acquired companies. We face
      particular challenges in that our acquisition strategy is based on companies
      located in and operating within China. Acquired companies' histories, the
      geographical  location, business models and business cultures will be
      different from ours in many respects. Even if we are successful in identifying
      and closing acquisitions of companies, our directors and senior management
      will
      face significant challenges in their efforts to integrate the business of the
      acquired companies or assets and to effectively manage our continued growth.
      Any
      future acquisitions will be subject to a number of challenges,
      including:




·
              the
                  diversion of management time and resources and the potential disruption
                  of
                  our ongoing business;




·
              difficulties
                  in maintaining uniform standards, controls, procedures and
                  policies;




·
              potential
                  unknown liabilities associated with acquired
                  businesses;
  ·
                the
                    difficulty of retaining key alliances on attractive terms with
                    partners
                    and suppliers; and




·
              the
                  difficulty of retaining and recruiting key personnel and maintaining
                  employee morale.




28




There
      can
      be no assurance that our efforts to integrate the operations of any acquired
      assets or companies will be successful, that we can manage our growth or that
      the anticipated benefits of these proposed acquisitions will be fully
      realized.





***We
      are dependent upon our management and our ability to hire key
      personnel.***





The
      success of our company is largely dependent on the personal efforts of Julianna
      Lu and Xiaofei Yu. Although we have employment agreements with these officers,
      the loss of the services of either of them would have a material adverse effect
      on our business and prospects. In addition, in order for us to undertake our
      operations as contemplated, it will be necessary for us to locate and hire
      experienced personnel who are bilingual and knowledgeable in the U.S. capital
      markets, China and generally accepted accounting principles applicable to U.S.
      companies. Our failure to attract and retain such experienced personnel on
      acceptable terms will have a material adverse impact on our ability to grow
      our
      business.





***Certain
      agreements to which we are a party and which are material to our operations
      lack
      various legal protections which are customarily contained in similar contracts
      prepared in the United States.***





Much
      of
      our business and operations are located in China. In addition, we are a party
      to
      certain contracts related to our operations. While these contracts contain
      the
      basic business terms of the agreements between the parties, these contracts
      do
      not contain certain provisions which are customarily contained in similar
      contracts prepared in the U.S., such as representations and warranties of the
      parties, confidentiality and non-compete clauses, provisions outlining events
      of
      defaults, and termination and jurisdictional clauses. Because these contracts
      omit these types of clauses, notwithstanding the differences in Chinese and
      U.S.
      laws, we may not have the same legal protections as we would if the contracts
      contained these additional provisions. We anticipate that our Chinese
      subsidiaries will likely enter into contracts in the future which will likewise
      omit these types of legal protections. While we have not been subject to any
      adverse consequences as a result of the omission of these types of clauses,
      and
      we consider the contracts to which we are a party to contain all the material
      terms of our business arrangements with the other party, future events may
      occur
      which lead to a dispute under agreements which could have been avoided if the
      contracts were prepared in conformity with U.S. standards. Contractual disputes
      which may arise from this lack of legal protection will divert management’s time
      from the operation of our business and require us to expend funds attempting
      to
      settle a possible dispute. This possible diversion of management time will
      limit
      the time our management would otherwise devote to the operation of our business,
      and the diversion of capital could limit the funds we have available to pay
      our
      ongoing operating expenses.





***Intensive
      competition for our subsidiaries will substantially affect our operating
      performance.***





Each
      of
      our subsidiaries are development stage businesses. As such, the operations
      are
      subject to all the risks inherent in launching a new business enterprise, in
      developing and marketing a new product or service, and in establishing a name
      and a business reputation. The likelihood of our success must be considered
      in
      light of problems, expenses, difficulties and delays frequently encountered
      in
      converting prototype designs into viable production designs, and in achieving
      market acceptance with a new type of product or service. Each of the newly
      formed entities have had no product revenues to date, have operated at a loss
      since inception, and will likely sustain operating losses for an indeterminate
      time period. There can be no assurance that we will ever generate material
      revenues or that we will ever be profitable.





***Because
      of the speculative nature of exploration of mineral properties, there is a
      substantial risk that our business will fail.***





The
      search for valuable minerals as a business is extremely risky. Exploration
      for
      minerals is a speculative venture necessarily involving substantial risk. The
      expenditures to be made by us in the exploration of the optioned mineral
      properties may not result in the discovery of commercial quantities of minerals.
      Problems such as unusual or unexpected formations and other conditions are
      involved in mineral exploration and often result in unsuccessful exploration
      efforts. In such a case, we would be unable to complete our business
      plan.





***Because
      of the inherent dangers involved in mineral exploration, there is a risk that
      we
      may incur liability or damages as we conduct our
      business.***





The
      search for valuable minerals involves numerous hazards. As a result, we may
      become subject to liabilities for such hazards, including pollution, cave-ins
      and other hazards against which we cannot insure or against which we may elect
      not to insure. The payment of such liabilities may have a material adverse
      effect on our financial position.




***Our
      targeted industries are heavily regulated and we may not be able to remain
      in
      compliance with all such regulations and we may be required to incur substantial
      costs in complying with such regulation.***





Our
      business of acquiring mining projects, properties and companies in China is
      subject to extensive regulation by China's Mining Ministry, and by other
      provincial, county and local authorities in jurisdictions in which products
      are
      processed or sold, regarding the processing, storage, and distribution of
      mineral products. In addition, processing facilities are subject to periodic
      inspections by government agencies. We may not be able to comply with current
      laws and regulations, or any future laws and regulations. To the extent that
      new
      regulations are adopted, we will be required to conform our activities in order
      to comply with such regulations. We may be required to incur substantial costs
      in order to comply. Our failure to comply with applicable laws and regulations
      could subject us to civil remedies, including fines, injunctions, recalls or
      seizures, as well as potential criminal sanctions which could have a material
      and adverse effect on our business operations and finances. Changes in
      applicable laws and regulations may also have a negative impact on our
      sales.




29




Our
      business of acquiring China based pharmaceutical companies is also subject
      to
      extensive regulation by China's Health Ministry, and by other provincial, county
      and local authorities in jurisdictions in which pharmaceutical drugs/products
      are processed or sold, regarding the processing, storage, and distribution
      of
      such products. In addition, processing facilities are subject to periodic
      inspection by government agencies. We may not be able to comply with current
      laws and regulations, or any future laws and regulations. To the extent that
      new
      regulations are adopted, we will be required to conform our activities in order
      to comply with such regulations. We may be required to incur substantial costs
      in order to comply. Our failure to comply with applicable laws and regulations
      could subject us to civil remedies, including fines, injunctions, recalls or
      seizures, as well as potential criminal sanctions which could have a material
      and adverse effect on our business operations and finances. Changes in
      applicable laws and regulations may also have a negative impact on our
      sales.





***Compliance
      with governmental regulations may impose additional costs, which may adversely
      affect our financial condition and results of
      operations.***





The
      processing, formulation, manufacturing, packaging, labeling, advertising and
      distribution of China Health’s products are subject to regulation by one or more
      federal agencies, including the Health Protectorate Branch in Canada, the FDA,
      the Federal Trade Commission ("FTC"), the Consumer Product Safety Commission,
      the United States Department of Agriculture, the United States Customs and
      Border Protection and the Environmental Protection Agency. These activities
      are
      also regulated by various agencies of the states and localities in which our
      products are sold.





The
      FDA
      may attempt to regulate any of China Health’s products that fall within its
      jurisdiction, and the FTC has jurisdiction to regulate the advertising of our
      products that fall within its jurisdiction. The FDA may not accept the evidence
      of safety for any new ingredients that we may want to market, may determine
      that
      a particular product or product’s ingredient present an unacceptable health
      risk, may determine that a particular statement of nutritional support that
      we
      want to use is an unacceptable drug claim or an unauthorized version of a food
      "health claim," may determine that a particular product is an unapproved new
      drug, or the FDA or the FTC may determine that particular claims are not
      adequately supported by available scientific evidence. Such a determination
      would prevent us from marketing particular products or using certain statements
      of nutritional support on our products. One of the key areas of our development
      focus is the specialty supplements category, which includes products that are
      directed at particular nutritional concerns. The FDA may not agree with China
      Health’s statements of nutritional support as to a particular specialty
      supplement or permit China Health to promote its specialty supplements directed
      at particular nutritional concerns. China Health also may be unable to
      disseminate third-party literature in connection with its products if the
      third-party literature fails to satisfy certain requirements. In addition,
      the
      FDA could require China Health to remove a particular product from the market.
      Any future recall or removal would result in additional costs to us, including
      lost revenues from any products that China Health is required to remove from
      the
      market, any of which could be material. Any such product recalls or removals
      could lead to liability, substantial costs and reduced growth
      prospects.




Although
      the regulation of dietary supplements is less restrictive than the regulation
      of
      drugs, dietary supplements may not continue to be subject to less restrictive
      regulation. Many of China Health’s dietary supplements contain traditional
      Chinese herbs which may or may not have been previously evaluated by the FDA.
      All herbs marketed in dietary supplements in the United States must be Generally
      Recognized as Safe (GRAS). The FDA maintains a list of problems herbs. If any
      of
      the herbs in China Health’s products appeared on the FDA's list, or if the
      agency determined there were issues concerning their safety, China Health would
      not be able to market the products containing these ingredients in the United
      States. We have not determined whether any of the herbs in China Health’s
      products are on the FDA's list of problem herbs and we have not determined
      whether any such herbs are Generally Recognized as Safe. If any of the herbs
      in
      China Health’s products have not been evaluated by the FDA and are not Generally
      Recognized as Safe, then China Health would not be permitted to sell products
      containing them in the United States. Any such prohibition could materially
      adversely affect our results of operations and financial condition.





Further,
      if more stringent statutes are enacted for dietary supplements, or if more
      stringent regulations are promulgated, China Health may not be able to comply
      with such statutes or regulations without incurring substantial expense, or
      at
      all. Legislation has been introduced in Congress to impose substantial new
      regulatory requirements for dietary supplements including adverse event
      reporting, post market surveillance requirements, FDA reviews of dietary
      supplement ingredients, safety testing and records inspection. If enacted,
      any
      of the proposed legislation may result in difficulty getting China Health’s
      products to the market and could raise our costs and hinder our
      business.





In
      addition, we expect that the FDA soon will adopt the proposed rules on Good
      Manufacturing Practice in manufacturing, packaging, or holding dietary
      ingredients and dietary supplements, which will apply to the products we
      manufacture. These regulations will require dietary supplements to be prepared,
      packaged and held in compliance with strict rules, and will require quality
      control provisions similar to those in the Good Manufacturing Practice
      regulations for drugs. China Health may not be able to comply with the new
      rules
      without incurring additional expenses.





Each
      of
      China Health’s products imported into the United States may be blocked at the
      border by U.S. Customs. The FDA could issue Import Alerts for any of our
      products if the agency considers them to be misbranded, adulterated and/or
      unapproved new drugs.




30




The
      FTC
      exercises jurisdiction over the advertising of dietary supplements. In the
      past,
      the FTC has instituted numerous enforcement actions against dietary supplement
      companies for failure to have adequate substantiation for claims made in
      advertising or for the use of false or misleading advertising claims. These
      enforcement actions have often resulted in consent decrees and the payment
      of
      civil penalties by the companies involved.




We
      are
      also subject to regulation under various state, local, and international laws
      that include provisions governing, among other things, the processing,
      formulation, manufacturing, packaging, labeling, advertising and distribution
      of
      our products that are deemed "dietary supplements" or "over-the-counter drugs."
      Government regulations in foreign countries may prevent or delay the
      introduction, or require the reformulation, of certain of our products. In
      addition, from time to time in the future, Congress, the FDA, the FTC or other
      federal, state, local or foreign legislative and regulatory authorities may
      impose additional laws or regulations that apply to China Health, repeal laws
      or
      regulations that we consider favorable to China Health or impose more stringent
      interpretations of current laws or regulations. We are not able to predict
      the
      nature of such future laws, regulations, repeals or interpretations or to
      predict the effect additional governmental regulation, when and if it occurs,
      would have on China Health’s business in the future. Such developments could,
      however, require reformulation of certain products to meet new standards,
      recalls or discontinuance of certain products not able to be reformulated,
      additional record-keeping requirements, increased documentation of the
      properties of certain products, additional or different labeling, additional
      scientific substantiation, or other new requirements. Any such developments
      could have a material adverse effect on our business, financial condition and
      results of operations.





***The
      nutritional supplements industry is intensely competitive. China Health has
      many
      well-established competitors with substantially greater financial and other
      resources than it. These factors may make it more difficult for China Health
      to
      successfully implement its business plan and may adversely affect its results
      of
      operations.***





The
      nutritional supplements industry is a large, highly fragmented and growing
      industry, with no single industry participant accounting for more than 10%
      of
      total industry retail sales. Participants include specialty retailers,
      supermarkets, drugstores, mass merchants (wholesalers), multi-level marketing
      organizations, mail order companies and a variety of other smaller participants.
      The market is also highly sensitive to the introduction of new products,
      including various prescription drugs, which may rapidly capture a significant
      share of the market. Increased competition from companies that distribute
      through retail or wholesale channels could have a material adverse effect on
      our
      financial condition and results of operations. Some of the neutraceutical
      companies that we will compete with are Weider Nutrition International, Inc.,
      USANA Health Sciences Inc., Nature's Sunshine Products, Inc. and Herbalife
      International, Inc. China Health is a development stage business and the only
      revenues it has received from product sales since inception were nominal and
      were generated during 2004. Accordingly, China Health has not been operational
      long enough to experience any of the above problems. However, since China Health
      is a development stage business, most, if not all companies in our industry
      have
      greater financial and other resources available to them and possess
      manufacturing, distribution and marketing capabilities greater than China
      Health’s. In addition, China Health’s competitors may be more effective and
      efficient in integrating new products. China Health may not be able to compete
      effectively and any of the factors listed above may cause price reductions,
      reduced margins and difficulties in gaining market share.




***Our
      financial status creates doubt whether we will continue as a going
      concern.***


We
        reported net losses totaling of $7,604,072  and $ 3,197,076 for the
        year ended December 31, 2007 and 2006, respectively. As of December 31, 2007,
        we
        had a working capital deficiency of $1,315,737 (Current assets less current
        liabilities) and an accumulated deficit of $ $16,797,449.. With our current
        resources, we expect to be able to satisfy our cash requirements through
        September 30, 2008. However, in order to expand our current business operations,
        fund future development and market, sell our three existing product lines
        and
        complete our acquisition projects, we will need to raise at least $50 million
        in
        financing over the next twelve months. There are no assurances that we will
        be
        able to achieve a level of revenues adequate to generate sufficient cash
        flow
        from operations or obtain additional financing through private placements,
        public offerings and/or bank financing necessary to support our working capital
        requirements. To the extent that funds generated from any private placements,
        public offerings and/or bank financing are insufficient, we will have to
        raise
        additional working capital. No assurance can be given that additional financing
        will be available, or if available, will be on acceptable terms. These
        conditions raise substantial doubt about our ability to continue as a going
        concern. If adequate working capital is not available we may be forced to
        discontinue operations, which would cause investors to lose the entire amount
        of
        their investment.





***We
      need significant infusions of additional capital, which may result in dilution
      to our shareholders' ownership and voting rights in our
      company.***





Based
      upon our current cash reserves and forecasted operations, we believe that we
      will need to obtain at least $2 million of outside funding in order to sustain
      our current business operations over the next twelve months, and at least $150
      million of outside funding in order to expand our business, fund future
      development and complete our acquisition projects. We have not in the past
      raised any funds and our operations have been funded primarily through loans
      from our officers and the issuance of shares of our common stock. Our need
      for
      capital to finance our business strategy, operations, and growth will be greater
      should, among other things, revenue or expense estimates prove to be incorrect.
      If we fail to arrange for sufficient capital in the future, we may be required
      to reduce the scope of our business activities, terminate our acquisition
      agreements and curtail plans to construct the biomass plants. In addition,
      we
      may not be able to obtain additional financing in sufficient amounts or on
      acceptable terms when needed, which could adversely affect our operating results
      and prospects. Debt financing must be repaid regardless of whether or not we
      generate profits or cash flows from our business activities. Equity financing
      may result in dilution to existing shareholders and may involve securities
      that
      have rights, preferences, or privileges that are senior to our common
      stock.




31




***The
      issuance of shares of our common stock to fund our operations and as
      consideration at the closing of our acquisition targets will result in
      significant dilution to our existing shareholders.***





To
      date
      our operations have been funded through cash advances from our officers and
      through the issuance of shares of our common stock. There can be no assurance
      that our officers will continue to fund our operations. The issuance of shares
      of our common stock will result in dilution to our existing holders. Further,
      to
      proceed with the closing of our acquisition targets in China, we will be
      required to issue shares of our common stock as consideration, this will result
      in significant dilution to our existing shareholders. The amount of dilution
      will be dependent upon the terms on which we issue shares of our common
      stock.




***Risks
      Related o Our Business***




***We
      are a development stage company and have a limited operating history upon which
      an evaluation of our company can be made. For that reason, it would be difficult
      for a potential investor to judge our prospects for
      success.***





We
      were
      organized in April 2002 and have had limited operations since our inception
      from
      which to evaluate our business and prospects. There can be no assurance that
      our
      future proposed operations will be implemented successfully or that we will
      ever
      have profits. If we are unable to sustain our operations, our shareholders
      may
      lose their entire investments. We face all the risks inherent in a new business,
      including the expenses, difficulties, complications and delays frequently
      encountered in connection with conducting operations, including capital
      requirements and management's potential underestimation of initial and ongoing
      costs. As a new business, we may encounter delays and other problems in
      connection with the methods of product distribution that we implement. We also
      face the risk that we will not be able to effectively implement our business
      plan. In evaluating our business and prospects, these difficulties should be
      considered. If we are not effective in addressing these risks, we will not
      operate profitably and we may not have adequate working capital to meet our
      obligations as they become due.




***We
      may incur material product liability costs.***





If
      our
      subsidiary, China Health, were to be engaged in the business of formulating
      and selling nutritional supplements for human consumption. As a distributor
      of
      products designed for human consumption, we are subject to product liability
      claims if the use of our products is alleged to have resulted in injury. We
      may
      be subject to various product liability claims, including, among others,
      allegations that our products include inadequate instructions for use or
      inadequate warnings concerning possible side effects and interactions with
      other
      substances. In addition, although our manufacturers maintain quality controls
      and procedures with respect to products that we sell, our products could contain
      contaminated substances. All of the products we sell are produced by third-party
      manufacturers. As a distributor of products manufactured by third parties,
      we
      may also be liable for various product liability claims for products we do
      not
      manufacture even though we have no control over the manufacturing procedures
      used in connection with the production of these third-party products. We are
      in
      the process of applying for product liability insurance. Such insurance, once
      obtained, may not be available at a reasonable cost, or may not be adequate
      to
      cover liabilities.





***If
      we are not able to manage growth of our business, our financial condition and
      results of operations will be negatively affected.***





We
      have
      expanded our business into renewable energy resources and have entered into
      agreements to cooperate to construct a number of biomass energy power plants.
      We
      also entered into an agreement to acquire Chalinhe Hydropower station. In
      addition, we have entered into an agreement to acquire Tong Ren KaiYu Minerals
      which owns 3 minerals licenses. We have not completed any of these planned
      acquisitions and expansion projects. If and when we consummate one or more
      of
      these transactions, we may experience a period of significant growth. Any future
      growth could cause significant strain on our managerial, operational, financial
      and other resources. Success in managing this expansion and growth will depend,
      in part, upon the ability of our senior management to effectively manage the
      growth of our business. Any failure to manage the proposed growth and expansion
      of our business could have a material adverse effect on our financial condition
      and results of operations.





***Our
      strategy of growth through acquisitions is inherently
      risky.***





Our
      strategy is to identify and target merger and/or acquisition candidates in
      China
      and throughout the world. Although we have signed a number of acquisition
      agreements to date, there can be no assurance that any or all of such
      acquisitions will be completed. Even if these acquisitions are completed, the
      final terms of the acquisition agreements may vary substantially from the terms
      described in the agreements. We have also entered into agreements to cooperate
      to construct a number of biomass energy power plants in China. These agreements
      require the investment of significant capital and require the approval of the
      appropriate administrative and regulatory bodies in China.




32




Our
      acquisition of companies and businesses and expansion of operations involve
      risks, including the following:





·
              the
                  potential inability to identify the companies best suited to our
                  business
                  plan;




·
            the
                potential inability to successfully integrate acquired operations
                and
                businesses or to realize anticipated synergies, economics of scale
                or
                other expected value;




·
            the
                potential need to restructure, modify or terminate customer relationships
                of the acquired company; and




·
            loss
                of key employees of acquired
                operations.




The
      occurrence of any one or more of these risks could result in a material adverse
      effect on our operations.




***If
      we fail to acquire and develop other products or product candidates, we may
      be
      unable to grow our business.***





China
      Health licenses the rights to a majority of its neutraceutical products from
      outside third parties. As part of China Health’s growth strategy, we intend to
      license or acquire additional products and product candidates for development
      and commercialization. The success of this strategy depends upon our ability
      to
      identify, select and acquire the right product candidates. Any product candidate
      we license or acquire may require additional development efforts prior to
      commercial sale, including extensive clinical testing and approval by regulatory
      authorities. All product candidates are prone to the risks of failure inherent
      in product development, including the possibility that the product candidate
      will not be shown to be sufficiently safe and effective. In addition, we cannot
      assure you that any products that we license or acquire will be manufactured
      or
      produced economically, successfully commercialized or widely accepted in the
      marketplace. Proposing, negotiating and implementing an economically viable
      product acquisition or license is a lengthy and complex process. Other
      companies, including those with substantially greater financial, marketing
      and
      sales resources, may compete with us for the acquisition or license of product
      candidates. We may not be able to acquire or license the rights to additional
      products on terms that we find acceptable, or at all.





***If
      our relationships with our manufacturers terminate, or their facilities are
      damaged or destroyed, we may be unable to develop or commercialize our
      products.***





Currently,
      only a limited number of companies manufacture China Health’s products. The
      number of contract manufacturers with the expertise, required regulatory
      approvals and facilities to manufacture China Health’s product candidates on a
      commercial scale is extremely limited, and it would take a significant amount
      of
      time to arrange for alternative manufacturers. If any of China Health’s
      manufacturers fail to deliver the required commercial quantities of bulk
      substance or finished product on a timely basis and at commercially reasonable
      prices, and we are unable to find one or more replacement manufacturers capable
      of production at a substantially equivalent cost, in substantially equivalent
      volumes and quality, and on a timely basis, China Health will likely be unable
      to meet customer demand as it begins to market and sell its existing product
      lines.





***We
      cannot assure you that the current Chinese policies of economic reform will
      continue. Because of this uncertainty, there are significant economic risks
      associated with doing business in China.***





Although
      the majority of productive assets in China are owned by the Chinese government,
      in the past several years the government has implemented economic reform
      measures that emphasize decentralization and encourage private economic
      activity. In keeping with these economic reform policies, the Chinese government
      has been openly promoting business development in order to bring more business
      into China. Because these economic reform measures may be inconsistent or
      ineffective, there are no assurances that:





·
            the
                Chinese government will continue its pursuit of economic reform
                policies;




·
            the
                economic policies, even if pursued, will be
                successful;




·
            economic
                policies will not be significantly altered from time to time;
                or




·
            business
                operations in China will not become subject to the risk of
                nationalization.




We
      cannot
      assure you that we will be able to capitalize on these economic reforms,
      assuming the reforms continue. Because our business model is dependent upon
      the
      continued economic reform and growth in China, any change in Chinese government
      policy could materially adversely affect our ability to implement our business
      model. China's economy has experienced significant growth in the past decade,
      but such growth has been uneven across geographic and economic sectors and
      has
      recently been slowing. Even if the Chinese government continues its policies
      of
      economic reform, there are no assurances that economic growth in that country
      will continue or that we will be able to take advantage of these opportunities
      in a fashion that will provide financial benefit to our company.




33




**Risks
      Related to Our Common Stock**




***There
      is a limited public market for our common stock. Failure to develop or maintain
      a trading market could negatively affect the value of our shares and make it
      difficult or impossible for shareholders to sell their
      shares.***





On
      April
      18, 2005, our common stock was approved for quotation on the OTC Bulletin Board
      under the symbol "CHHH."  In May 2007 our trading symbol was changed
      to CHHL. To date there has been a limited trading market in our common stock
      on
      the OTC Bulletin Board. Failure to develop or maintain an active trading market
      could negatively affect the value of our shares and make it difficult for our
      shareholders to sell their shares or recover any part of their investment in
      us.
      The market price of our common stock may be highly volatile. In addition to
      the
      uncertainties relating to our future operating performance and the profitability
      of our operations, factors such as variations in our interim financial results,
      or various, as yet unpredictable factors, many of which are beyond our control,
      may have a negative effect on the market price of our common stock.





***Our
      common stock is subject to the "penny stock" rules of the sec and the trading
      market in our securities is limited, which makes transactions in our common
      stock cumbersome and may reduce the value of an investment in our
      stock.***





The
      SEC
      has adopted Rule 3a51-1 which establishes the definition of a "penny stock,"
      for
      the purposes relevant to us, as any equity security that has a market price
      of
      less than $5.00 per share or with an exercise price of less than $5.00 per
      share, subject to certain exceptions. For any transaction involving a penny
      stock, unless exempt, Rule 15g-9 requires:





·
            that
                a broker or dealer approve a person's account for transactions in
                penny
                stocks; and




·
            the
                broker or dealer receive from the investor a written agreement to
                the
                transaction, setting forth the identity and quantity of the penny
                stock to
                be purchased.




In
      order to approve a person's account for transactions in penny stocks, the broker
      or dealer must:





·
            obtain
                financial information and investment experience objectives of the
                person;
                and




·
            make
                a reasonable determination that the transactions in penny stocks
                are
                suitable for that person and the person has sufficient knowledge
                and
                experience in financial matters to be capable of evaluating the risks
                of
                transactions in penny stocks.




The
      broker or dealer must also deliver, prior to any transaction in a penny stock,
      a
      disclosure schedule prescribed by the SEC relating to the penny stock market,
      which, in highlight form:





·
            sets
                forth the basis on which the broker or dealer made the suitability
                determination; and




·
            that
                the broker or dealer received a signed, written agreement from the
                investor prior to the transaction.




Generally,
      brokers may be less willing to execute transactions in securities subject to
      the
      "penny stock" rules. This may make it more difficult for investors to dispose
      of
      our common stock and cause a decline in the market value of our
      stock.





Disclosure
      also has to be made about the risks of investing in penny stocks in both public
      offerings and in secondary trading and about the commissions payable to both
      the
      broker-dealer and the registered representative, current quotations for the
      securities and the rights and remedies available to an investor in cases of
      fraud in penny stock transactions. Finally, monthly statements have to be sent
      disclosing recent price information for the penny stock held in the account
      and
      information on the limited market in penny stocks.





***We
      have not voluntarily implemented various corporate governance measures, in
      the
      absence of which, stockholders may have more limited protections against
      interested director transactions, conflicts of interest and similar
      matters.***





Recent
      Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted
      in
      the adoption of various corporate governance measures designed to promote the
      integrity of the corporate management and the securities markets. Some of these
      measures have been adopted in response to legal requirements. Others have been
      adopted by companies in response to the requirements of national securities
      exchanges, such as the NYSE or the Nasdaq Stock Market, on which their
      securities are listed. Among the corporate governance measures that are required
      under the rules of national securities exchanges are those that address board
      of
      directors' independence, audit committee oversight, and the adoption of a code
      of ethics. Although we have adopted a Code of Ethics, we have not yet adopted
      any of these other corporate governance measures and, since our securities
      are
      not yet listed on a national securities exchange, we are not required to do
      so.
      We have not adopted corporate governance measures such as an audit or other
      independent committees of our board of directors as we presently do not have
      any
      independent directors. If we expand our board membership in future periods
      to
      include additional independent directors, we may seek to establish an audit
      and
      other committees of our board of directors. It is possible that if we were
      to
      adopt some or all of these corporate governance measures, stockholders would
      benefit from somewhat greater assurances that internal corporate decisions
      were
      being made by disinterested directors and that policies had been implemented
      to
      define responsible conduct. For example, in the absence of audit, nominating
      and
      compensation committees comprised of at least a majority of independent
      directors, decisions concerning matters such as compensation packages to our
      senior officers and recommendations for director nominees may be made by a
      majority of directors who have an interest in the outcome of the matters being
      decided. Prospective investors should bear in mind our current lack of corporate
      governance measures in formulating their investment decisions.




34




***Provisions
      of our certificate of incorporation and bylaws may delay or prevent a takeover
      which may not be in the best interests of our
      stockholders.***





Provisions
      of our certificate of incorporation and bylaws may be deemed to have
      anti-takeover effects, which include when and by whom special meetings of our
      stockholders may be called, and may delay, defer or prevent a takeover attempt.
      In addition, certain provisions of Nevada law also may be deemed to have certain
      anti-takeover effects which include that control of shares acquired in excess
      of
      certain specified thresholds will not possess any voting rights unless these
      voting rights are approved by a majority of a corporation's disinterested
      stockholders.





In
      addition, our certificate of incorporation authorizes the issuance of up to
      20,000,000 shares of preferred stock with such rights and preferences as may
      be
      determined by our board of directors. Our board of directors may, without
      stockholder approval, issue preferred stock with dividends, liquidation,
      conversion or voting rights that could adversely affect the voting power or
      other rights of our common stockholders.




35




**Item
      7. Financial Statements.**





All
      financial information required by this Item is attached hereto at the end of
      this report.





**Item
      8. Changes In and Disagreements With Accountants on Accounting and Financial
      Disclosure.**





On
      January 29, 2008, the Company engaged Sherb & Co. LLP (“Sherb & Co.”) to
      serve as independent auditors for the Company and its subsidiaries.





During
      the Company’s two most recent fiscal years and the subsequent interim period
      through January 29, 2008, neither the Company nor anyone on its behalf consulted
      Sherb & Co. regarding (i) the application of accounting principles to a
      specified completed or contemplated transaction, or the type of audit opinion
      that might be rendered on the Company’s financial statements; or (ii) any matter
      that was the subject of a disagreement as defined in Item 304(a)(1)(iv) of
      Regulation S-B or a reportable event as described in Item 304(a)(1)(v) of
      Regulation S-B.





On
      November 26, 2007, RBSM LLP, formerly Russell Bedford Stefanou Mirchandani
      LLP
“RBSM”) resigned as independent registered public accounting firm of China
      Holdings, Inc. and its subsidiaries (the "Company").




RBSM
      report on the Company’s financial statements for the fiscal year ended December
      31, 2006 contained an explanatory paragraph indicating that there was
      substantial doubt as to the Company’s ability to continue as a going
      concern.  Other than such statement, no report of RBSM on the
      financial statements of the Company for the past fiscal year contained an
      adverse
      opinion  or  disclaimer  of  opinion,   or  was  qualified  or  modified  as  to
      uncertainty, audit scope or accounting principles. RBSM did not issue a report
      on the Company’s financial statements for the fiscal year ended December 31,
      2005.




In
      connection with the audits of the Company’s financial statements for the year
      ended December 31, 2006 and the subsequent interim period through the date
      of
      their resignation on November 26, 2007, there were no disagreements with RBSM
      on
      any matters of accounting principles or practices, financial statement
      disclosure, or auditing scope or procedures which, if not resolved to the
      satisfaction of RBSM would have caused RBSM to make reference to the matter
      in
      their report.




During
      the most recent fiscal year and the subsequent interim period through
      November 26, 2007, there were no reportable events, as defined in
      Item 304(a)(1)(v) of Regulation S-K.





On
      January 19, 2007, the Board of Directors of China Health Holding, Inc. (the
      "Company") approved the Company's dismissal of Dale Matheson Carr-Hilton LaBonte
      ("DMCL") as independent auditors for the Company and its
      subsidiaries.




DMCL's
      report on the Company's financial statements for the fiscal years ended December
      31, 2005 and 2004 contained an explanatory paragraph indicating that there
      was
      substantial doubt as to the Company's ability to continue as a going concern.
      Other than such statement, no report of DMCL on the financial statements of
      the
      Company for either of the past two years contained an adverse opinion or
      disclaimer of opinion, or was qualified or modified as to uncertainty, audit
      scope or accounting principles.





During
      the Company's two most recent fiscal years ended December 31, 2005 and 2004
      and
      the subsequent interim period through January 19, 2007: (i) there have been
      no
      disagreements with DMCL on any matter of accounting principles or practices,
      financial statement disclosure or auditing scope or procedure, which
      disagreements, if not resolved to the satisfaction of DMCL, would have caused
      it
      to make reference to the subject matter of the disagreement in connection with
      its reports; and (ii) DMCL did not advise the Company of any of the events
      requiring reporting in this Current Report on Form 8-K under Item
      304(a)(1)(iv)(B) of Regulation S-B.





On
      January 19, 2007, the Board of Directors approved the Company's engagement
      of
      Russell Bedford Stefanou Mirchandani LLP ("Russell Bedford") as independent
      auditors for the Company and its subsidiaries. The Company engaged Russell
      Bedford on January 19, 2007. During the Company's two most recent fiscal years
      ended December 31, 2005 and 2004 and the subsequent interim period through
      January 19, 2007, neither the Company nor anyone on its behalf consulted Russell
      Bedford regarding (i) the application of accounting principles to a specific
      completed or contemplated transaction, (ii) the type of audit opinion that
      might
      be rendered on the Company's financial statements, (iii) or oral advice that
      was
      an important factor considered by us in reaching our decision as to any
      accounting, auditing or financial reporting issue or (iv) any matter that was
      the subject of a disagreement or event identified in response to Item
      304(a)(1)(iv) of Regulation S-B (there being none).




**Item
      8A. Controls and Procedures.**




(a)
      EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. As of the date of this report,
      the Company's management carried out an evaluation, under the supervision of
      the
      Company's Chief Executive Officer and the Chief Financial Officer of the
      effectiveness of the design and operation of the Company's system of disclosure
      controls and procedures pursuant to the Securities and Exchange Act, Rule
      13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation,
      the
      Chief Executive Officer and Chief Financial Officer concluded that the Company's
      disclosure controls and procedures were effective, as of the date of their
      evaluation, for the purposes of recording, processing, summarizing and timely
      reporting material information required to be disclosed in reports filed by
      the
      Company under the Securities Exchange Act of 1934.




36




(b)
      CHANGES IN INTERNAL CONTROLS. There were no changes in internal controls over
      financial reporting that occurred during the period covered by this report
      that
      has materially affected, or is likely to materially effect, the Company's
      internal control over financial reporting.





(c)Our
      Chief Executive Officer and Chief Financial Officer (collectively, the
      "Certifying Officers") are responsible for establishing and maintaining
      disclosure controls and procedures for us.  Such officers have
      concluded (based upon such officers' evaluation of these controls and procedures
      as of the end of the period covered by this report) that our disclosure controls
      and procedures are effective to ensure that information required to be disclosed
      by us in this report is accumulated and communicated to management, including
      our principal executive officers as appropriate, to allow timely decisions
      regarding required disclosures.





The
      Certifying Officers have also indicated that there were no significant changes
      in our internal controls or other factors that could significantly affect such
      controls subsequent to the date of their evaluation and there were no corrective
      actions with regard to significant deficiencies and material
      weaknesses.





Our
      management, including each of the Certifying Officers, does not expect that
      our
      disclosure controls or our internal controls will prevent all errors and
      fraud.  A control system, no matter how well conceived and operated,
      can provide only reasonable, not absolute, assurance that the objectives of
      the
      control system are met.  In addition, the design of a control system
      must reflect the fact that there are resource constraints, and the benefits
      of
      controls must be considered relative to their costs.  Because of the
      inherent limitations in all control systems, no evaluation of controls can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, within a company have been detected.  These inherent limitations
      include the realities that judgments in decision-making can be faulty, and
      that
      breakdowns can occur because of simple error or
      mistake.  Additionally, controls can be circumvented by the individual
      acts of some persons, by collusion of two or more people or by management
      override of the control.  The design of any systems of controls also
      is based in part upon certain assumptions about the likelihood of future events,
      and there can be no assurance that *any
      design will succeed in achieving its stated goals under all potential future
      conditions.  Because of these inherent limitations in a cost-effective
      control system, misstatements due to error or fraud may occur and not be
      detected.*




37




*Item
      8B.* *Management’s
      Annual Report on Internal Control Over Financial
      Reporting.*




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting for the company in accordance with as defined
      in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934,
      as
      amended. Our internal control over financial reporting is designed to provide
      reasonable assurance regarding the (i) effectiveness and efficiency of
      operations, (ii) reliability of financial reporting and the preparation of
      financial statements for external purposes in accordance with generally accepted
      accounting principles, and (iii) compliance with applicable laws and
      regulations.




Management’s
      assessment of the effectiveness of the small business issuer’s internal control
      over financial reporting is as of the year ended December 31, 2007. We believe
      that internal control over financial reporting is effective. We have not
      identified any, current material weaknesses considering the nature and extent
      of
      our current operations and any risks or errors in financial reporting under
      current operations.




This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the Securities and Exchange
      Commission  that permit us to provide only management’s report in this
      annual report.




**Item
      8B. Other Information.**





***None***




**PART
      III**





**Item
      9. Directors, Executive Officers, Promoters and Control Persons** a **nd
      Corporate Governance;; Compliance With Section 16(a) of the Exchange Act.**




***The
      following table sets forth information regarding the members of our board of
      directors and our executive officers. All directors hold office for one-year
      terms until the election and qualification of their successors. Officers are
      elected annually by the board of directors and serve at the discretion of the
      board.***




**Name**
            
            **Position**Julianna
                Lu
            
            Chief
                Executive Officer, Principal Financial Officer, Principal Accounting
                Officer, Treasurer and Chairman of the Board of
                DirectorsXiao
                Fei Yu
            
            Vice
                Chairman of Board of DirectorsRonald
                Shon
            
            Chairman
                of Advisory BoardMoxian
                Chen
            
            Senior
                Vice President/General ManagerZheng-lun
                Fan
            
            Vice
                President of Research and Development and
                Director





Pursuant
      to our bylaws, our directors are elected at our annual meeting of stockholders
      and each director holds office until his successor is elected and qualified.
      Officers are elected by our Board of Directors and hold office until an
      officer's successor has been duly appointed and qualified unless an officer
      sooner dies, resigns or is removed by the Board. There are no family
      relationships among any of our directors and executive officers.





**Background
      of Executive Officers and Directors**





**Julianna
      Lu, Founder, BSc. & MSc., Chief Executive Officer, Principal Financial
      Officer, Principal Accounting Officer, Treasurer and Chairman of the Board
      of
      Directors** .
      Ms. Lu
      founded China Health Holding, Inc. and has been our principal executive officer
      since our formation in 2002. From 2000 until 2002, Ms. Lu was the President
      and
      Chief Executive Officer of AGPL Pharma Corporation. From 1999 until 2003, Ms.
      Lu
      was the President and Chief Executive Officer of Auspicious J.K. Enterprises,
      Ltd.




**Professor
      Xiao Fei Yu, Vice Chairman and Director.** Mr. Yu
      was appointed as our Vice Chairman in early 2007. Mr. Yu has been a member
      of
      our Board of Directors since May 26, 2004 and our Vice President since October
      6, 2004. Mr. Yu has helped China Health Holding create and develop 26 natural
      herbal product formulas that make up our King of Herbs and Taoist Medicine
      product lines. Mr. Yu has been the President and Director of Taoist Tantric
      & Toltec Research and Development Centre located in Beijing, People's
      Republic of China. From 1998 to Present, Mr. Yu has been a Research Scientific
      Consultant of Central TCM Research and Development Institute located in Beijing,
      People's Republic of China. From 1999 to Present, Mr. Yu has been teaching
      Taoism, Taoist medicine and Indian classical philosophy & religion as a
      professor in the Department of Philosophy at the University of CCCP located
      in
      Beijing, People's Republic of China. From 1994 until 1999, Mr. Yu was an
      Associate Professor in Taoism, Taoist medicine, Buddhism and Scientific
      Philosophy in the Department of Philosophy at the University of
      CCCP.




38




**Ronald
      Shon, Chairman of Advisory Board** Mr.Shon
      was appointed as the Chairman of Advisory Board by the Company in early 2007.Mr.
      Shon is the President of The Shon Group of Companies, a group of privately
      held
      real estate investment (such as the AAA+ Cathedral Office Building in downtown
      Vancouver, Canada) and development companies. Mr. Shon is also the President
      of
      China Education Resources Inc., and a director of the Spectra Group of Great
      Restaurants Inc. Mr. Shon holds a B.A. from Stanford University and a M.B.A.
      from the Wharton School, University of Pennsylvania.





**Moxian
      Chen, Senior Vice President/General Manager,** Mr. Chen
      has jointed as  the Senior Vice President /General Manager for China
      Holdings, Inc. in later 2007. He brought his extensive experience that he gained
      in waste-to-energy facilities, power plants, waste pyrolysis plants, combustion
      technology firms, energy supply centers, energy recovery and air pollution
      control centers to  China Holdings, Inc. He has been involved in over
      twenty projects including waste-to-energy plants, industrial waste disposal
      projects and thermal power plants. He participated in all stages of the project
      including market development, technology research and development, product
      design, manufacture, installation, test and practical operation. His managerial
      experiences, technical skills as well as his cultural awareness contribute
      to
      China Holdings, Inc. greatly.





**Professor
      Zheng-lun Fan, Vice President** . **** Dr.
      Fan
      was appointed as our director on February 9, 2007 and has served as our Vice
      President of Research and Development since 2005. During the past five years,
      Mr. Fan has been a Research Fellow at Cui Yue-li Research Center of Traditional
      Chinese Medicine. Dr. Fan is also a MSC, Professor, Chief Physician Research
      Fellow at Cui Yue-li Research Center of Traditional Chinese Medicine, Beijing,
      P. R. China. Prof. Z. Fan is an expert in Chinese medicine at the national
      level
      in P. R. China and he has practiced Chinese medicine for more than 40
      years.





***There
      are no family relationships between any of our directors and executive
      officers.***





***Board
      Committees***




We
      currently do not have standing committees of our board of directors and our
      board of directors is acting in such capacity. We intend to establish an audit
      committee of the board of directors.





***Audit
      Committee Financial Expert***





**Audit
      Committee.**





We
      intend
      to establish an audit committee of the board of directors, which will consist
      of
      independent directors. The audit committee’s duties would be to recommend to our
      board of directors the engagement of independent auditors to audit our financial
      statements and to review our accounting and auditing principles. The audit
      committee would review the scope, timing and fees for the annual audit and
      the
      results of audit examinations performed by the internal auditors and independent
      public accountants, including their recommendations to improve the system of
      accounting and internal controls. The audit committee would at all times be
      composed exclusively of directors who are, in the opinion of our board of
      directors, free from any relationship which would interfere with the exercise
      of
      independent judgment as a committee member and who possess an understanding
      of
      financial statements and generally accepted accounting principles. A copy of
      our
      AUDIT COMMITTEE CHARTER can also be obtained from our website www.chinaholding.net .





**Compensation
      Committee.**





We
      intend
      to establish a compensation committee of the board of directors. The
      compensation committee would review and approve our salary and benefits
      policies, including compensation of executive officers. The compensation
      committee would also administer our stock option plans and recommend and approve
      grants of stock options under such plans. A copy of our COMPENSATION COMMITTEE
      CHARTER can also be obtained from our website www.chinaholding.net .





**Code
      of Ethics**





We
      have
      adopted our Code of Ethics and Business Conduct or Officers, Directors and
      Employees that applies to all of our officers, directors and employees. Upon
      request, we will provide to any person without charge a copy of our Code of
      Ethics. Any such request should be made to Attn: Julianna Lu, China Holdings,
      Inc, either to (a) our business address at 101 Convention Center Drive, Suite
      700, Las Vegas, NV 89107, or (b) our mailing address at 8E - C2, Global Trade
      Mansion, No.9A GuangHua Road, Chaoyang District, Beijing PR China 100020, Tel:
      86-10-6586-4770; fax: 86-10-6586-4790. A copy of our Code of Ethics can also
      be
      obtained from our website www.chinaholding.net .




39




**Item
      10. Executive Compensation.**





**SUMMARY
      COMPENSATION TABLE**





The
      following table sets forth information concerning the total compensation that
      we
      have paid or that has accrued on behalf of our chief executive officer and
      other
      executive officers with annual compensation exceeding $100,000 during the fiscal
      years ending December 31, 2007 and December 31, 2006.





The
      following table summarizes the annual and long-term compensation paid to
      Julianna Lu, our chief executive officer, and Xiao Fei Yu, our vice chairman
      and
      president. During 2007, no executive officer other than Julianna Lu and Xiao
      Fei
      Yu received annual remuneration in excess of $100,000.





**Summary
      Compensation Table**




***Name
                and Principal Position***
            
            ***Year***
            
            ***Salary(1)***
            
            ***Bonus***
            
            ***Stock
                Awards ($)***
            
            ***Option
                Awards***
              ***($)***
            
            ***All
                Other Compensation***
            
            ***Total******Julianna
                Lu***
              ***Chief
                Executive Officer***
            
            
            *2007*
            
            *$*
            *240,000*
            
            *$*
            *138,800*
            
            
            
            
            
            
            
            
            
            
            *$*
            *412,980**2006*
            
            *$*
            *240,000*
            
            *$*
            *138,800*
            
            
            *—*
            
            
            *—*
            
            
            
            
            *$*
            *378,800****Xiao
                Fei Yu***
              ***Vice
                Chairman of the Board and President***
            
            
            *2007*
            
            *$*
            *119,724*
            
            *$*
            *271,400*
            
            
            
            
            
            
            
            
            
            
            *$*
            *391,124*





(1)
      Ms.
      Lu’s salary for 2006 and 2007 has been accrued and is included in loans to us
      from Ms. Lu. Ms. Lu’s loans are described more fully below under Item 12.
      Certain Relationship and Related Transactions. As of December 31, 2007, we
      owed
      an aggregate of $ 973,719 to Ms. Julianna Lu.





**Outstanding
      Equity Awards at Fiscal Year-End Table.**




No
      options were granted to our executive officers during the fiscal year ended
      December 31, 2007.




**Director
      Compensation**




Our
      directors did not receive any compensation for serving in their capacities
      as
      the Company’s directors.




**Employment
      Agreements and Director Compensation**





Pursuant
      to various management and consulting contracts the Company has committed to
      pay
      fees and issue common stock as follows: a monthly management fee of $20,000
      to
      the Company’s Chief Executive Officer starting on January 1, 2006 (ii) to pay a
      3% royalty on gross sales, upon commencement of sales (iii) pay a monthly
      consulting fee of $7,000 to a shareholder and officer of the Company to Mr.
      Xiaofei Yu, the Vice Chairman of the Company.




In
      February 2008, the Company has appointed Ms. ZhiFang Lu as Projects Manager
      for
      the Company and the company’s wholly owned subsidiary: China Power, Inc. The
      Company has issued to Ms. Lu a total of 250,000 common stocks in February 2008
      for these services, and the Company has agreed to pay for her services on stocks
      compensations basis.





In
      January 2008, the Company has appointed Mr. Benjamin Chen as Projects Manager
      for the Company and the Company’s wholly owned subsidiary: China Power, Inc. The
      Company agreed to pay for 7000 RMB as monthly salary. The Company has issued
      to
      Mr. Chen a total of 250,000 common stocks in February 2008.





On
      August
      3, 2007, the Company appointed Moxian Chen as the Senior Vice President and
      General Manager for the company and its subsidiary China Power Inc. As December
      31 2007, the Company has issued and compensated to Mr. Chen for a total of
      2,000,000 common stocks for the management services provided from Mr. Chen
      to
      the Company.





On
      April
      3, 2007, the Company appointed Mr. Ron Shon as the chairman of its advisory
      board. Mr. Shon. The Company has issued Mr. Shon a total of 500,000 shares
      of
      common stocks and a total of 6,000,000 common stocks warrants at an exercise
      price of $0.20 per share, These warrants expire three years form the date of
      grant. On November 1, 2007, the Company has issued Mr. Shon a total of 5,000,000
      shares of common stocks warrants at an exercise price of $0.15 per share, and
      an
      additional 5,000,000 shares of common stocks warrants at an exercise price
      of
      $0.50 per share, These warrants expire five years form the date of
      grant.




40




On
      December 18, 2007, the Company appointed Charles Fu as its President. The
      Company’s Board of Directors terminated the contract with Charles Fu on February
      8 2008. Management believes that there is no liability to such termination.
      The
      termination will be legally effective on April 8 2008. The CEO of the Company
      is
      now the President of the Company. There is no shares and options issued to
      Charles Fu as December 31 2007.





On
      February 9, 2007, the Company appointed Dr. Zheng-Lun Fan as a director of
      the
      Company. Dr. Fan has served as the Company's Vice President of Research &
Development since 2005.





**Consulting
      Agreements**





**Investor
      Relations Programs and Agreement**





On
      February 1, 2008, China Holdings, Inc. (the “Company”) entered into a Marketing
      Services Agreement with Wall Street Reporter Inc. (“WSR”) pursuant to which WSR
      will provide the Company with various investor relations and marketing services,
      such as conferences, interviews and press releases, for a term of one
      year.  In exchange for these services, the Company has agreed to pay
      WSR a fee comprised of $9,500 cash and four million (4,000,000) restricted
      shares of the Company’s common stock. On February 1, 2008, the Company agreed to
      issue four million (4,000,000) restricted shares of the Company’s common stock,
      par value $.001 per share, pursuant to the Marketing Services Agreement
      described in Item 1.01 above.  The Company issued the restricted
      shares in reliance upon the exemption from registration provided by Rule 506
      of
      Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended,
      as a
      sale not involving any public offering. The sale of these shares of common
      stock
      was not registered under the Securities Act and the shares may not be sold
      absent registration or an applicable exemption from registration
      requirements.





On
      January 17, 2007, we entered into a consultancy agreement with Shanghai Ogilvy
      & Mather Marketing Communications Consulting Co. Ltd. -Beijing Branch
      (“Shanghai Ogilvy”) pursuant to which Shanghai Ogilvy will provide us with
      investor relations and public relations services. The agreement is for a term
      of
      one year and can be terminated by either party by summary notice in the event
      of
      any serious breach and/or continuation of any breach by either party of their
      obligations under the Agreement or ten business days written notice. Upon
      termination of the agreement, the parties have agreed to settle outstanding
      invoices to each other, within 30 days from the date of termination. As
      compensation for Shanghai Ogilvy’s services, we have agreed to pay Shanghai
      Ogilvy $12,500 per month commencing February 1, 2007. In addition, we agreed
      to
      issue CEOcast 125,000 shares of common stock for its services during the initial
      three-month grace period. In February 2007, we agreed to issue 2,00,000 shares
      of common stock as additional compensation for advances public relations
      services.





On
      October 19, 2006, we entered into an agreement with Investor Relations
      International (“IRI”) pursuant to which IRI will provide us with investor
      relations and financial communication services. The agreement is for a term
      of
      three years and can be terminated by us with or without cause. The agreement
      provides for a monthly retainer of $10,000 for the first three months and a
      monthly retainer of $15,000 commencing January 28, 2007. In addition, we agreed
      to issue to IRI 3,000,000 shares of common stock and an aggregate of 4,000,000
      warrants to purchase shares of our common stock. In addition, as compensation
      for advanced public relations services to us, we issued to Rourke Holdings,
      the
      parent company of IRI, 3,400,000 shares of our common stock. On May 9, 2005,
      we
      entered into an agreement pursuant to which CEOcast, Inc., a New York
      corporation will provide us with investor relations services. The agreement
      is
      for a term of one year and has an initial three-month grace period. As
      compensation for CEOcast's services, we have agreed to pay CEOcast $7,500 per
      month. In addition, we agreed to issue CEOcast 125,000 shares of common stock
      for its services during the initial three-month grace period. The agreement
      may
      be terminated by us at any time after delivering 15 business days' prior written
      notice of termination. If we deliver CEOcast a notice of termination during
      the
      initial three-month grace period, we agreed to compensate CEOcast for the entire
      three-month period. Thereafter, if we deliver a notice of termination, we will
      only be liable to CEOcast for services rendered through the date of termination.
      To date we have issued an aggregate of 265,375 shares to CEOcast pursuant to
      the
      agreement.




On
      May 1,
      2005, the Company entered into an agreement with Bevitor Holding Ltd. and James
      Simpson, individually, pursuant to which, Bevitor Holding Ltd. and Mr. Simpson
      will provide management consulting services and investor relations services
      to
      the Company. Mr. Simpson is the President of Bevitor Holding Ltd. In connection
      with this agreement, the November 16, 2004 agreement employing Mr. Simpson
      as
      the Company's Vice President of Corporate Development was terminated. The term
      of the consulting agreement commences retroactively as of June 16, 2004 and
      continues for a period of three years, terminating on June 16, 2007. The
      consulting agreement otherwise may be terminated for any reason by either party.
      Bevitor Holding Ltd. and Mr. Simpson collectively will be paid $3,500 per month
      for their services beginning May 1, 2005. Bevitor Holding Ltd. and Mr. Simpson,
      collectively, also will be granted an option to purchase 600,000 shares of
      the
      Company's common stock at a price of $0.30 per share, exercisable until the
      earlier of June 16, 2009 or 30 days after termination of the consulting
      agreement. In addition, Bevitor Holding Ltd. and Mr. Simpson, collectively,
      are
      entitled to a 10% finder's fee for any capital raising transactions introduced
      to the Company by them.




41




**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





The
      following table sets forth certain information, as of April 8, 2008 with respect
      to the beneficial ownership of the outstanding common stock by (i) any holder
      of
      more than five (5%) percent; (ii) each of our executive officers and directors;
      and (iii) our directors and executive officers as a group. Except as otherwise
      indicated, each of the stockholders listed below has sole voting and investment
      power over the shares beneficially owned.




Name
                and address of Beneficial Owner (1)
            
            Common
                Stock
              Beneficially
                Owned (2)
            
            Percentage
                of
              Common
                Stock (3)
            
            Preferred
                Stock
              Beneficially
                owned
            
            Percentage
                of
              Preferred
                Stock (4)
            
            Percentage
                of Total VoteJulianna
                Lu (5)
            
            
            114,506,473
            
            
            61.89
            %
            
            2,500,000
            
            
            100
            %
            
            63.24
            %Xiao
                Fei Yu (6)
            
            
            14,281,250
            
            
            7.72
            %
            
            -
            
            
            -
            
            
            7.99
            %All
                officers and directors as a group (2persons)
            
            
            
            
            
            
            
            
            2,500,000
            
            
            100
            %




*
      Less
      than 1%




(1)
      Except as otherwise indicated, the address of each beneficial owner is c/o
      our
      business address at 101 Convention Center Drive, Suite 700, Las Vegas, NV 89107,
      r (b) our mailing address at 8E-C2, Global Trade mansion, No.9A GuangHua Road,
      Chaoyang District, Beijing Pr China, Tel: 86-10-6586-4770; Fax:
      86-10-6586-4790;




(2)
      Beneficial ownership is determined in accordance with the rules of the
      Securities and Exchange Commission and generally includes voting or investment
      power with respect to the shares shown. Except where indicated by footnote
      and
      subject to community property laws where applicable, the persons named in the
      table have sole voting and investment power with respect to all shares of voting
      securities shown as beneficially owned by them.




(3)
      Based
      on March 28, 2008, the issuer had a total of 185,007,060 outstanding shares
      of
      Common Stock (4) Based on 2,500,000 shares outstanding as of March28, 2008,.Each
      share of Series A preferred stock is entitled to two votes.




(5)
      Includes (a) options to purchase 2,500,000 shares of common stock at $0.10
      per
      share that expire on June 1, 2009; (b) options to purchase 300,000 shares of
      common stock at $0.05 per share that expire on December 30, 2007; (c) options
      to
      purchase 500,000 shares of common stock at $0.05 per share that expire on April
      30, 2008; (d) options to purchase 2,500,000 shares of common stock at $0.30
      per
      share that expire on December 31, 2010; (e) warrants to purchase 1,500,000
      shares of common stock at $0.20 per share; (f) warrants to purchase 10,000,000
      shares of common stock at $0.10 that expire on December 10, 2011; (g) 10,000,000
      warrants to purchase shares of common stock at $0.10 that expire on December
      10,
      2016; (h) 10,000,000 warrants to purchase shares of common stock at $0.l0 that
      expire on March 11, 2012; (i) 10,000,000 warrants to purchase shares of common
      stock at a price of $0.20 that expire on March 11, 2017; (j) 1,250,000 warrants
      to purchase shares of preferred stock at $0.15 that expire on December 28,
      2008;
      (k) a total of 114,506,473 common stocks which include with1). a total
      of  67,506,473 common stocks owns, 2) a total of 5,500,000 common
      stocks option as listed as above, 3). additional a total of 41,500,000 common
      stocks warrants as listed as above




(6)
      Includes (a) options to purchase 250,000 shares of common stock at $0.20 per
      share that expire on July 9, 2007; (b) options to purchase 1,000,000 shares
      of
      common stock at $0.20 per share that expire on December 3, 2008; and (c)
      warrants to purchase 400,000 shares of common stock at $0.20 per share that
      expire on September 18, 2011, (d) Based on March28 2008 the issuer has a total
      of 9,881,250 common stocks, plus a total of 4,400,000 common stocks
      options/warrants as listed as above.




**Item
      12. Certain Relationships and Related Transactions.**





Pursuant
      to an agreement dated May 1, 2004 between A E&E Pharma Corporation (n/k/a
      China Health Holding, Inc.), Julianna Lu, our founder and principal executive
      officer, and Xiao Fei Yu. Ms. Lu and Mr. Yu sold to us all proprietary rights
      and formulas to the "26 100% natural herbal medicinal products" (the "Products")
      that comprise our King of Herbs and Taoist Medicine product lines. On August
      8,
      2004, the parties signed an Amended and Restated Intellectual Property Purchase
      Agreement, which clarifies the terms of the Purchase




Agreement
      for the Products. In consideration for the proprietary rights and formulas
      to
      the Products, we agreed to: (a) issue to Ms. Lu 2,000,000 shares of common
      stock; (b) pay to Ms. Lu $150,000 cash; (c) pay to Ms. Lu following the closing
      date and until May 1, 2029, a cash amount equal to 4.8% of gross revenue from
      sales of the Products; (d) issue to Mr. Yu 200,000 shares of common stock;
      (e)
      pay to Mr. Yu $25,000 cash; and (f) pay to Mr. Yu following the closing date
      and
      until May 1, 2029, a cash amount equal to 0.2% of gross revenue from sales
      of
      the Products. None of the required cash payments have been made to date. The
      outstanding cash payments under the Amended and Restated Intellectual Property
      Agreement accrue interest at the rate of 10% per annum. Our management believes
      the terms of the Amended and Restated Intellectual Property Agreement are on
      terms at least as favorable as could have been obtained from unrelated third
      parties.




42




Since
      April 22, 2002, Julianna Lu has extended numerous loans to China Health Holding.
      In addition, Ms. Lu’s salary for 2006, 2005 and 2004 have accrued and are
      carried as loans to the Company. The aggregate amount due to Ms. Lu as of
      December 31, 2006 totaled $716,573. These loans bear interest at the rate of
      10%
      per annum, are on an unsecured basis and do not have any terms for repayment.
      These loans have not been documented by any written agreement. Our management
      believes the terms of these loans are at least as favorable as could have been
      obtained from unrelated third parties.




In
      December 2005, the Board of Directors agreed to issue 1,000,000 Series A
      preferred shares with a fair value of $0.15 per share to settle debt of $150,000
      owed to Ms. Lu. Each preferred share is convertible into two shares of common
      stock commencing two years from the date of issuance if the market price of
      the
      common stock is not below $1.00 per share Ms. Lu also received an option to
      purchase 1,000,000 shares of Series A preferred stock at a price of $.15 per
      share.





On
      October 12, 2006, as consideration for the forgiveness of $300,000 in debt
      owed
      to Ms. Lu, we issued to Ms. Lu 10,000,000 shares of common stock and warrants
      to
      purchase 10,000,000 shares of common stock at $0.10 which expire on December
      10,
      2011 and warrants to purchase 10,000,000 shares of common stock at $0.20 which
      expire on December 10, 2016.





On
      March
      12, 2007 as consideration for the forgiveness of $300,000 in debt owed to Ms.
      Lu, we issued to Ms. Lu 5,000,000 shares of common stock and warrants to
      purchase 10,000,000 shares of common stock at $0.10 which expire on March 11,
      2012 and warrants to purchase 10,000,000 shares of common stock at $0.20 which
      expire on March 11, 2017.





As
      of
      December 31, 2007, we had outstanding loans to our CEO, Julianna Lu, in the
      amount of $ 973,719.Vice President, XiaoFei Yu, in the amount of $ 297,484.
      There are no formal agreements for when repayment of the loans must be made.
      The
      loans accrue interest at the rate of 10% per annum.





As
      of
      December 31, 2006 China Health Holding owed an aggregate of $135,728 to Xiao
      Fei
      Yu from various loans and payments made by Mr. Yu on behalf of China Health
      Holding. These loans bear interest at the rate of 10% per annum, are on an
      unsecured basis and do not have any terms for repayment. These loans have not
      been documented by any written agreement. Our management believes the terms
      of
      these loans are at least as favorable as could have been obtained from unrelated
      third parties.





As
      of
      December 31, 2006 China Health Holding owed an aggregate of $30,130.80 to James
      Simpson from various loans and payments. These loans bear interest at the rate
      of 10% per annum, are on an unsecured basis and do not have any terms for
      repayment. These loans have not been documented by any written agreement. Our
      management believes the terms of these loans are at least as favorable as could
      have been obtained from unrelated third parties.





As
      of
      December 31, 2007, we had outstanding loans to our CEO, Julianna Lu, in the
      amount of $ 973,719.Vice President, XiaoFei Yu, in the amount of $ 297,484.
      There are no formal agreements for when repayment of the loans must be made.
      The
      loans accrue interest at the rate of 10% per annum.





**Item
      13. Exhibits.**




**Exhibit
                  Number**
              
              **Description**3.01
              
              Articles
                  of Incorporation of the A E&E Pharma Corporation (Incorporated by
                  reference to the Company’s registration statement on Form SB-2 (File No.
                  333-119034), filed with the Securities and Exchange Commission
                  on
                  September 16, 2004)3.02
              
              Certificate
                  of Amendment to Articles of Incorporation, changing name to China
                  Health
                  Holding, Inc. (Incorporated by reference to the Company’s registration
                  statement on Form SB-2 (File No. 333-119034), filed with the Securities
                  and Exchange Commission on September 16, 2004)3.03
              
              Certificate
                  of Amendment to Articles of Incorporation increasing the Company’s
                  authorized shares of common stock (Incorporated by reference to
                  the
                  Company’s 10-QSB filed with the Securities and Exchange Commission on May
                  12, 2005)3.04
              
              Bylaws
                  (Incorporated by reference to the Company’s registration statement on Form
                  SB-2 (File No. 333-119034), filed with the Securities and Exchange
                  Commission on September 16, 2004)3.05
              
              Certificate
                  of Designation, Powers, Preferences and Rights of Series A Preferred
                  Stock, filed with the State of Nevada on February 21, 2006. (Incorporated
                  by reference to Form 8-K filed with the Securities and Exchange
                  Commission
                  on March 28, 2006)3.06
              
              Amendment
                  to Certificate of Designation, Powers, Preferences and Rights of
                  Series A
                  Preferred Stock, filed with the State of Nevada on June 19, 2006.
                  (filed
                  herewith)10.01
              
              Purchase
                  Agreement, dated May 1, 2004, between A E&E Pharma Corporation,
                  Julianna Lu and Xiao Fei Yu (Incorporated by reference to the Company’s
                  registration statement on Form SB-2 (File No. 333-119034), filed
                  with the
                  Securities and Exchange Commission on September 16,
                  2004)10.02
              
              Amended
                  and Restated Intellectual Property Purchase Agreement, dated August
                  8,
                  2004, between China Health Holding, Inc., Julianna Lu and Xiao
                  Fei Yu
                  (Incorporated by reference to the Company’s registration statement on Form
                  SB-2 (File No. 333-119034), filed with the Securities and Exchange
                  Commission on September 16, 2004)10.03
              
              Amended
                  and Restated Intellectual Property Purchase Agreement dated as
                  of March
                  22, 2005 between China Health Holding, Inc., Xiao Fei Yu and Fei
                  Yu
                  (Incorporated by reference to Form 8-K filed with the Securities
                  and
                  Exchange Commission on March 28,
                  2005)
  43
  10.04
              
              Exclusive
                  Licensing Agreement for 19 Cordyceps Products, dated March 9, 2004,
                  between Hotway Nutraceutical Canada Co., Ltd. and A E&E Pharma
                  Corporation (Incorporated by reference to the Company’s registration
                  statement on Form SB-2 (File No. 333-119034), filed with the Securities
                  and Exchange Commission on September 16, 2004)10.05
              
              Exclusive
                  Licensing Agreement for De-Daibe and Depressor Herbs, dated March
                  9, 2004,
                  between Hotway Nutraceutical Canada Co., Ltd. and A E&E Pharma
                  Corporation (Incorporated by reference to the Company’s registration
                  statement on Form SB-2 (File No. 333-119034), filed with the Securities
                  and Exchange Commission on September 16, 2004)10.06
              
              Manufacturing
                  Agreement, dated December 18, 2005, between Canadian Phytopharmaceuticals
                  Corp. and China Health World Trade Corporation (filed
                  herewith)10.07
              
              Manufacturing
                  Agreement, dated April 8, 2004, between A E&E Pharma Corporation and
                  GFR Pharma, Ltd. (Incorporated by reference to the Company’s registration
                  statement on Form SB-2 (File No. 333-119034), filed with the Securities
                  and Exchange Commission on September 16, 2004)10.08
              
              Lease
                  Agreement, dated May 11, 2004, between A E&E Pharma Corporation and
                  Insignia Corporate Establishments (Eight) Inc. (Incorporated by
                  reference
                  to the Company’s registration statement on Form SB-2 (File No.
                  333-119034), filed with the Securities and Exchange Commission
                  on
                  September 16, 2004)10.9
              
              Executive
                  Management Services Agreement, dated June 1, 2004, between China
                  Health
                  Holding, Inc. and Julianna Lu (Incorporated by reference to the
                  Company’s
                  registration statement on Form SB-2 (File No. 333-119034), filed
                  with the
                  Securities and Exchange Commission on September 16,
                  2004)10.10
              
              Director
                  Services Agreement, dated May 26, 2004, between China Health Holding,
                  Inc.
                  and Xiao Fei Yu (Incorporated by reference to the Company’s registration
                  statement on Form SB-2 (File No. 333-119034), filed with the Securities
                  and Exchange Commission on September 16, 2004)10.11
              
              Consulting
                  Services Agreement, dated June 8, 2004, between China Health Holding,
                  Inc.
                  and Xiao Fei Yu (Incorporated by reference to the Company’s registration
                  statement on Form SB-2 (File No. 333-119034), filed with the Securities
                  and Exchange Commission on September 16, 2004)10.12
              
              Director
                  Consulting Services Agreement, dated July 8, 2004, between China
                  Health
                  Holding, Inc. and Dick Wu (Incorporated by reference to the Company’s
                  registration statement on Form SB-2 (File No. 333-119034), filed
                  with the
                  Securities and Exchange Commission on September 16,
                  2004)10.13
              
              Management
                  Services Agreement, dated July 9, 2004, between China Health Holding,
                  Inc.
                  and Kenneth Douglas (Incorporated by reference to the Company’s
                  registration statement on Form SB-2 (File No. 333-119034), filed
                  with the
                  Securities and Exchange Commission on September 16,
                  2004)10.14
              
              Consulting
                  Agreement, dated August 8, 2004, between China Health Holding,
                  Inc. and
                  National Media Associates (Incorporated by reference to the Company’s
                  registration statement on Form SB-2 (File No. 333-119034), filed
                  with the
                  Securities and Exchange Commission on September 16,
                  2004)10.15
              
              Amendment
                  No. 1 to Consulting Agreement, dated September 6, 2004, between
                  China
                  Health Holding, Inc. and National Media Associates (Incorporated
                  by
                  reference to the Company’s registration statement on Form SB-2 (File No.
                  333-119034), filed with the Securities and Exchange Commission
                  on
                  September 16, 2004)10.16
              
              Letter
                  Agreement, dated November 2, 2004, amending the Exclusive Licensing
                  Agreement for 19 Cordyceps Products and the Exclusive Licensing
                  Agreement
                  for De-Daibe and Depressor Herbs between Hotway Nutraceutical Canada
                  Co.,
                  Ltd. and A E&E Pharma Corporation (Incorporated by reference to the
                  Company’s registration statement on Form SB-2 (File No. 333-119034), filed
                  with the Securities and Exchange Commission on November 22,
                  2004)10.17
              
              Lease
                  Agreement, dated October 20, 2004, between China Health Holding,
                  Inc. and
                  Insignia Office Centers (Vancouver), Inc. (Incorporated by reference
                  to
                  the Company’s registration statement on Form SB-2 (File No. 333-119034),
                  filed with the Securities and Exchange Commission on November 22,
                  2004)10.18
              
              Management
                  Consulting Agreement, dated November 8, 2004, between China Health
                  Holding, Inc. and Dr. Wu, Xiannan (David Woo) (Incorporated by
                  reference
                  to the Company’s registration statement on Form SB-2 (File No.
                  333-119034), filed with the Securities and Exchange Commission
                  on November
                  22, 2004)10.19
              
              Amendment
                  dated October 3, 2004 to Director Consulting Agreement between
                  China
                  Health Holding, Inc. and Dick Wu (Incorporated by reference to
                  the
                  Company’s registration statement on Form SB-2 (File No. 333-119034), filed
                  with the Securities and Exchange Commission on November 22,
                  2004)10.20
              
              Amendment
                  dated October 6, 2004 to Management Consulting Agreement between
                  China
                  Health Holding, Inc. and Xiao Fei Yu (Incorporated by reference
                  to the
                  Company’s registration statement on Form SB-2 (File No. 333-119034), filed
                  with the Securities and Exchange Commission on November 22,
                  2004)10.21
              
              Management
                  Consulting Services Agreement, dated November 16, 2004, between
                  China
                  Health Holding, Inc. and James H. Simpson (Incorporated by reference
                  to
                  the Company’s registration statement on Form SB-2 (File No. 333-119034),
                  filed with the Securities and Exchange Commission on November 22,
                  2004)10.22
              
              Executive
                  Management Services Agreement dated April 28, 2005 with Julianna
                  Lu
                  (Incorporated by reference to the Company’s current report on Form 8-K
                  filed with the Securities and Exchange Commission on May 11,
                  2005)10.23
              
              IR
                  Consulting Services Agreement dated May 1, 2005 with Bevitor Holding
                  Ltd.
                  and James Simpson (Incorporated by reference to the Company’s current
                  report on Form 8-K filed with the Securities and Exchange Commission
                  on
                  May 11, 2005)
  44
  10.24
              
              Consulting
                  Agreement dated May 1, 2005 with Dick Wu (Incorporated by reference
                  to the
                  Company’s current report on Form 8-K filed with the Securities and
                  Exchange Commission on May 11, 2005)10.25
              
              Purchasing
                  Agreement for 108 100% Natural Taoist Herbal Medicinal Products,
                  Formulas
                  and Ownership entered into on March 22, 2005 between China Health
                  Holding,
                  Inc., Xiao Fei Yu and Fei Yu (Incorporated by reference to Form
                  8-K filed
                  with the Securities and Exchange Commission on March 28,
                  2005)10.26
              
              Consulting
                  Agreement dated June 9, 2005 with CEOcast, Inc. (Incorporated by
                  reference
                  to the Company’s current report on Form 8-K filed with the Securities and
                  Exchange Commission on June 15, 2005)10.27
              
              The
                  China Health Holding, Inc. Incentive Stock Plan effective June
                  21, 2005.
                  (Incorporated by reference to the Company’s Registration Station on Form
                  S-8 filed with the Securities and Exchange Commission on June 24,
                  2005)10.28
              
              Letter
                  of Intent entered into as of January 16, 2006 by and between China
                  Health
                  Holding, Inc. and with WangJing Hospital and WangJing Hospital
                  of China
                  Academy of Chinese Medical Sciences. (Incorporated by reference to
                  the Company’s current report on Form 8-K filed with the Securities and
                  Exchange Commission on February 2, 2006)10.29
              
              Letter
                  of Intent effective as of February 28, 2006 by and between China
                  Health
                  Holding, Inc. and Shaanxi WanAn Pharmaceutical Co. Ltd. (Incorporated
                  by
                  reference to the Company’s current report on Form 8-K filed with the
                  Securities and Exchange Commission on February 28,
                  2006)10.30
              
              Letter
                  of Intent entered into as of April 16, 2006 by and between China
                  Health
                  Holding, Inc. and Henan Tiankang Pharmaceuticals Ltd. (Incorporated
                  by
                  reference to the Company’s current report on Form 8-K filed with the
                  Securities and Exchange Commission on April 20, 2006)10.31
              
              Letter
                  of Intent dated as of May 2, 2006 by and between China Health Holding,
                  Inc. and Shannxi Meichen Pharmaceuticals, Ltd. (Incorporated by
                  reference
                  to the Company’s current report on Form 8-K filed with the Securities and
                  Exchange Commission on May 15, 2006)10.32
              
              Letter
                  of Intent dated as of June 22, 2006 by and between China Health
                  Holding,
                  Inc. and Furen Pharmaceuticals Group Co., Ltd. (Incorporated by
                  reference
                  to the Company’s current report on Form 8-K filed with the Securities and
                  Exchange Commission on June 27, 2006)10.33
              
              Acquisition
                  Definitive Agreement by and among Henan Furen Huaiqingtang Pharmaceuticals
                  Co. Ltd. and Henan Furen Pharmaceutical Group Co. Ltd. and the
                  shareholders of Henan Furen Huaiqingtang Pharmaceutical dated as
                  of August
                  7, 2006 (Incorporated by reference to the Company’s current report on Form
                  8-K filed with the Securities and Exchange Commission on August
                  14,
                  2006)10.34
              
              Acquisition
                  Definitive Agreement by and among China Health Holdings, Inc.,
                  Shaanxi
                  Meichen Pharmaceuticals Co. Ltd., Chen Meiying and the shareholders
                  of
                  Shaanxi Meichen Pharmaceutical Co. Ltd dated as of September 3
                  and
                  September 7, 2006 (Incorporated by reference to the Company’s current
                  report on Form 8-K filed with the Securities and Exchange Commission
                  on
                  September 19, 2006)10.35
              
              Letter
                  of Intent dated as of October 11, 2006 by and between China Health
                  Holding, Inc. and BeiJing Boran Pharmaceutical Co. Ltd. (Incorporated
                  by
                  reference to the Company’s current report on Form 8-K filed with the
                  Securities and Exchange Commission on October 16, 2006)10.36
              
              Letter
                  of Intent dated as of November 28, 2006 by and between China Health
                  Holding, Inc. and Xi'an Chunhui Pharmaceuticals Co. Ltd. (Incorporated
                  by
                  reference to the Company’s current report on Form 8-K filed with the
                  Securities and Exchange Commission on December 6, 2006)10.37
              
              Acquisition
                  Definitive Agreement by and between China Health Holding, Inc.
                  and Xi'An
                  Meichen Pharmaceutical Co. Ltd. dated as of January 1, 2007 (Incorporated
                  by reference to the Company’s current report on Form 8-K filed with the
                  Securities and Exchange Commission on January 5, 2007)10.38
              
              Binding
                  Memorandum of Understanding entered into as of January 12, 2007
                  by and
                  among China Health Holdings, Inc., Beijing Jifatang Chinese Medicine
                  Research Institute and Beijing Jifatang Chinese Medicine Research
&
                  Development Institution (Incorporated by reference to the Company’s
                  current report on Form 8-K filed with the Securities and Exchange
                  Commission on January 19, 2007)10.39
              
              Corporate
                  Development Consulting Services Agreement by and between China
                  Health
                  Holding, Inc. and Julianna Lu dated as of January 9, 2007. (filed
                  herewith)10.40
              
              Corporate
                  Development Consulting Services Agreement by and between China
                  Health
                  Holding, Inc. and Xiao Fei Yu dated as of February 9, 2007. (Incorporated
                  by reference to the Company’s current report on Form 8-K filed with the
                  Securities and Exchange Commission on February 15,
                  2007)10.41
              
              Corporate
                  Development Consulting Services Agreement by and between China
                  Health
                  Holding, Inc. and Dr. Zheng -Lun Fan dated as of February 9, 2007.
                  (Incorporated by reference to the Company’s current report on Form 8-K
                  filed with the Securities and Exchange Commission on February 15,
                  2007)14.1
              
              Code
                  of Ethics31.1
              
              Certification
                  by Chief Executive Officer/Chief Financial Officer, required by
                  Rule
                  13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant
                  to
                  Section 302 of the Sarbanes-Oxley Act of 200232.1
              
              Certification
                  by Chief Executive Officer/Chief Financial Officer, required by
                  Rule
                  13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350
                  of
                  Chapter 63 of Title 18 of the United States Code, promulgated pursuant
                  to
                  Section 906 of the Sarbanes-Oxley Act of 20023.4
              
              Certificate
                  of Amendment to Articles of Incorporation, changing the Company’s name to
                  China Holdings, Inc. (Incorporated by reference to the Company’s 8-K filed
                  with the Securities and Exchange Commission on May 8,
                  2008)
  45
  3.5
              
              Certificate
                  of Amendment to Articles of Incorporation increasing the Company’s
                  authorized shares of common stock (Incorporated by reference to
                  the
                  Company’s 8-K/A filed with the Securities and Exchange Commission on
                  February 29, 2008)3.7
              
              Certificate
                  of Designation, Powers, Preferences and Rights of Series A Preferred
                  Stock, filed with the State of Nevada on February 21, 2006. (Incorporated
                  by reference to Form 8-K filed with the Securities and Exchange
                  Commission
                  on March 28, 2006)10.6
              
              Manufacturing
                  Agreement, dated December 18, 2005, between Canadian Phytopharmaceuticals
                  Corp. and China Health World Trade Corporation (Incorporated by
                  reference
                  to the Company’s Form 10-KSB filed with the Securities and Exchange
                  Commission on April 3, 2007)10.37
              
              Acquisition
                  Definitive Agreement by and between China Health Holding, Inc.
                  and Xi'An
                  Meichen Pharmaceutical Co. Ltd. dated as of January 1, 2007 (Incorporated
                  by reference to the Company’s current report on Form 8-K filed with the
                  Securities and Exchange Commission on January 5, 2007)10.38
              
              Binding
                  Memorandum of Understanding entered into as of January 12, 2007
                  by and
                  among China Health Holdings, Inc., Beijing Jifatang Chinese Medicine
                  Research Institute and Beijing Jifatang Chinese Medicine Research
&
                  Development Institution (Incorporated by reference to the Company’s
                  current report on Form 8-K filed with the Securities and Exchange
                  Commission on January 19, 2007)10.39
              
              Corporate
                  Development Consulting Services Agreement by and between China
                  Health
                  Holding, Inc. and Julianna Lu dated as of January 9, 2007. (Incorporated
                  by reference to the Company’s 10-KSB filed with the Securities and
                  Exchange Commission on April 3, 2007)10.40
              
              Corporate
                  Development Consulting Services Agreement by and between China
                  Health
                  Holding, Inc. and Xiao Fei Yu dated as of February 9, 2007. (Incorporated
                  by reference to the Company’s current report on Form 8-K filed with the
                  Securities and Exchange Commission on February 15,
                  2007)10.41
              
              Corporate
                  Development Consulting Services Agreement by and between China
                  Health
                  Holding, Inc. and Dr. Zheng -Lun Fan dated as of February 9, 2007.
                  (Incorporated by reference to the Company’s current report on Form 8-K
                  filed with the Securities and Exchange Commission on February 15,
                  2007)10.42
              
              Marketing
                  Services Agreement dated February 1, 2008 between China Holdings,
                  Inc. and
                  Wall Street Reporter Inc. (Incorporated by reference to the Company’s
                  Current Report on Form 8-K filed with the Securities and Exchange
                  Commission on February 4, 2008)10.43
              
              Executive
                  Employment and Service Contract dated as of December 18, 2007 by
                  and
                  between China Holdings, Inc. and Charles Y. Fu (Incorporated by
                  reference
                  to the Company’s Current Report on Form 8-K filed with the Securities and
                  Exchange Commission on December 21, 2007)10.44
              
              Acquisition
                  Transaction Agreement dated November 30, 2007 by and among China
                  Holdings,
                  Inc. and Tong Ren Kai Yu Minerals Co., Ltd, Tong Ren Shi BaHuangZhen
                  NeShao Pb-Zn-P Minderals Plant and Gui Zhou FuRuiDe Minerals Co.,
                  Ltd.
                  (Incorporated by reference to the Company’s Current Report on Form 8-K
                  filed with the Securities and Exchange Commission on December 10,
                  2007)10.45
              
              LongHua
                  Biomass Energy Power Plant Project Investment and Construction
                  Agreement
                  dated October 10, 2007 between LongHua government, Beijing JinRenTaiHe
                  Trade Ltd. and China Power Inc. (Incorporated by reference to the
                  Company’s 10-QSB filed with the Securities and Exchange Commission on
                  October 19, 2007)10.46
              
              Taihu
                  Biomass Energy Power Plant Project Investment Construction Agreement
                  dated
                  October 28, 2007 between China Anhui Taihu Government and China
                  Power Inc.
                  (Incorporated by reference to the Company’s 10-QSB filed with the
                  Securities and Exchange Commission on October 19, 2007)10.47
              
              Acquisition
                  Purchase Agreement between China Holdings, Inc. and Tong RenKaiYu
                  Minerals, Co. Ltd. dated October 27, 2007 (Incorporated by reference
                  to
                  the Company’s 10-QSB filed with the Securities and Exchange Commission on
                  October 19, 2007)10.48
              
              Agreement
                  for Cooperation between Con Yang County Government and China Power,
                  Inc.
                  dated October 29, 2007 (Incorporated by reference to the Company’s 10-QSB
                  filed with the Securities and Exchange Commission on October 19,
                  2007)14.1
              
              Code
                  of Ethics: view via www.chinaholding.net21.1
              
              List
                  of 3 Subsidiaries, include: China Power, Inc., China Minerals Holdings,
                  Inc. and China Health Holdings, Inc.31.1
              
              Section
                  302 Certification of Principal Executive Officer31.2
              
              Section
                  302 Certification of Principal Accounting Officer32.1
              
              Section
                  302 Certification of Principal Executive Officer32.2
              
              Section
                  302 Certification of Principal Accounting
                  Officer


46




**Item
      14. Principal Accountant Fees and Services.**





The
      following sets forth fees billed to us by our auditors during the fiscal years
      ended December 31, 2007 and 2006 for (i) services rendered for the audit of
      our
      annual financial statements and the review of our quarterly financial
      statements, (ii) services by our auditor that are reasonably related to the
      performance of the audit or review of our financial statements and that are
      not
      reported as Audit Fees, (iii) services rendered in connection with tax
      compliance, tax advice and tax planning, and (iv) all other fees for services
      rendered.




**Audit
      Fees**





The
      aggregate fees billed for professional services rendered by our principal
      accountants for the audit of our financial statements, for the reviews of the
      financial statements included in our annual report on Form 10-KSB, and for
      other
      services normally provided in connection with statutory filings were $65,968.89
      and $40,700 for the years ended December 31, 2007 and December 31, 2006,
      respectively.





**Audit
      Related Fees**





We
      incurred fees of $10,418 for the year ended December 31, 2007 and $-0-(NIL)
      for
      the year ended December 31, 2006, respectively, for professional services
      rendered by our principal accountants that are reasonably related to the
      performance of the audit or review of our financial statements and not included
      in "Audit Fees."





**All
      Other Fees**





We
      did
      not incur any other fees for professional services rendered by our principal
      accountants during the years ended December 31, 2007 and December 31,
      2006.





**Audit
      Committee Pre-Approval Policies and Procedures**




The
      Company currently does not have a designated Audit Committee, and accordingly,
      the Company’s Board of Directors’ policy is to pre-approve all audit and
      permissible non-audit services provided by the independent auditors. These
      services may include audit services, audit-related services, tax services and
      other services. Pre-approval is generally provided for up to one year and any
      pre-approval is detailed as to the particular service or category of services
      and is generally subject to a specific budget. The independent auditors and
      management are required to periodically report to the Company’s Board of
      Directors regarding the extent of services provided by the independent auditors
      in accordance with this pre-approval, and the fees for the services performed
      to
      date. The Board of Directors may also pre-approve particular services on a
      case-by-case basis.




47




**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**CHINA
                HOLDINGS, INC.**Date: April
                10, 2008
            By:
            /s/ Julianna
                LuChief
                Executive Officer, Principal Financial Officer, Principal Accounting
                Officer, Treasurer and Chairman of the Board of
                Directors




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.




SIGNATURE
            
            TITLE
            
            DATE*/s/Julianna
                Lu*
              
              Julianna
                Lu
            
            Chairman
                of the Board of Directors
                Chief
                  Executive Officer, and Chief
                  Financial
                    Officer
            
            April
                10, 2008*/s/
                Xiao Fei Yu*
              
              Xiao
                Fei Yu
            
            Vice
                Chairman and Director
            
            April
                10, 2008*/s/
                Zheng-lun Fan*
              Zheng-lun
                Fan
            
            Director
            
            April
                10, 2008




48


**CHINA
      HOLDINGS, INC.**




**INDEX
      TO FINANCIAL STATEMENTS**


**(
      2007 Annual Audit /Consolidated Financial Statement)**





**Page**Reports
                of Independent Registered Public Accounting Firm
            
            
            F-1Consolidated
                Balance Sheet as of December 31, 2007
            
            
            F-3Consolidated
                Statements of Losses for the years ended December 31, 2007 and
                2006and
                the period April 3, 2002 (date of inception) to December 31,
                2007
            
            
            F-4Consolidated
                Statement of Deficiency in Stockholders' Equity for the
                periodApril
                3, 2002 (date of inception) to December 31, 2007
            
            
            F-5Consolidated
                Statements of Cash Flows for the years ended December 31, 2007 and
                2006and
                the period April 3, 2002 (date of inception) to December 31,
                2007
            
            
            F-9Notes
                to Consolidated Financial Statements
            
            
            F-10




49




REPORT
          OF
          INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
          the
          Board of Directors and Stockholders of
 China
          Holdings, Inc. and Subsidiaries
 
 We
          have
          audited the accompanying balance sheet of China Holdings Inc. and Subsidiaries
          (a development stage enterprise) as of December 31, 2007 and the related
          statements of operations, changes in stockholders' deficit and cash flows
          for
          the year then ended. These financial statements are the responsibility
          of the
          Company's management. Our responsibility is to express an opinion on these
          financial statements based on our audit.
 
 The
          cumulative statements of operations, changes in stockholder's deficit and
          cash
          flows for the period April 3, 2002 to December 31, 2007 include amounts
          for the
          period April 3, 2002 to December 31, 2006, which were audited by other
          auditors
          whose reports included an explanatory paragraph describing conditions that
          raise
          substantial doubt about the Company's ability to continue as a going concern.
          Our opinion, insofar as it relates to the amounts included for the period
          January April 3, 2002 to December 31, 2006, is based solely on the report
          of the
          other auditors. The other auditors’ reports, dated various dates, expressed
          unqualified opinions and included explanatory paragraphs regarding the
          Company’s
          ability to continue as a going concern. The other auditors reports have
          been
          furnished to us, and our opinion, insofar as it related to the amounts
          included
          for such prior periods, is based solely on the reports of other auditors.
          The
          consolidated financial statements for the period January April 3, 2002
          to
          December 31, 2006 reflect a development stage net loss.
 
 We
          conducted our audit in accordance with auditing standards generally accepted
          in
          the United States of America. Those standards require that we plan and
          perform
          the audit to obtain reasonable assurance about whether the financial statements
          are free of material misstatement. An audit includes examining, on a test
          basis,
          evidence supporting the amounts and disclosures in the financial statements.
          An
          audit also includes assessing the accounting principles used and significant
          estimates made by management, as well as evaluating the overall financial
          statement presentation. We believe that our audit provide a reasonable
          basis for
          our opinion.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the financial position of China Holdings, Inc. and
          Subsidiaries as of December 31, 2007 and the results of its operations
          and its
          cash flows for the year then ended and for the period from January April
          3, 2002
          through December 31, 2007, in conformity with accounting principles generally
          accepted in the United States of America.
 
 The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As discussed in Note 2a to the financial
          statements, the Company has incurred significant losses since inception.
          This
          raises substantial doubt about the Company's ability to continue as a going
          concern. Management's plans, with respect to these matters are also described
          in
          Note 2a to the financial statements. The financial statements do not include
          any
          adjustments that might result should the Company be unable to continue
          as a
          going concern.
 
 
 /s/
          Sherb
& Co., LLP
 ----------------------------
 Sherb
          & Co., LLP
 Certified
          Public Accountants
 
 April
          10,
          2008
 New
          York,
          New York
 F-1
   **RUSSELL
        BEDFORD STEFANOU MIRCHANDANI LLP**
 **CERTIFIED
        PUBLIC ACCOUNTANTS**
  REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To
        the
        Stockholders and Board of Directors of China Holdings, Inc.:
 
 We
        have
        audited the accompanying consolidated balance sheets of China Health Holding,
        Inc. (a development stage company) as of December 31, 2006, and the consolidated
        statements of operations, stockholders' deficit and cash flows for the years
        ended December 31, 2006. These financial statements are the responsibility
        of
        the Company's management. Our responsibility is to express an opinion on
        these
        financial statements based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform an audit to obtain reasonable assurance whether the financial
        statements are free of material misstatement. The Company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audits included consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the Company's internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements. An audit also includes assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, these consolidated financial statements present fairly in all material
        respects, the financial position of the Company as at December 31, 2006 and
        the
        results of operations and its cash flows and the changes in stockholders'
        deficit for the years ended December 31, 2006 in accordance with accounting
        principles generally accepted in the United States of America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 2(a) to the financial
        statements, the Company has a working capital deficiency, a capital deficiency,
        has incurred significant losses since inception and further losses are
        anticipated in the development of its products raising substantial doubt
        as to
        the Company's ability to continue as a going concern. Management's plans
        in
        regard to these matters are described in Note 2(a). The financial statements
        do
        not include any adjustments that might result from the outcome of this
        uncertainty.
   **/s/
        RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP**
 Russell
        Bedford Stefanou Mirchandani LLP
  **CERTIFIED
        PUBLIC ACCOUNTANTS**
 **New
        York, New York**
 **April
        15 2008**






F-2






CHINA
                HOLDING INC.(a
                development stage company)CONSOLIDATED
                BALALNCE SHEET




December
                31,2007
            
            2006ASSETSCURRENT
                ASSETSCash
            
            $
            9,958
            
            $
            -Prepaid
                expenses and other current assets
            
            
            6,723
            
            
            97,759Total
                current assets
            
            
            16,681
            
            
            97,759Property
                ansd equipment, net
            
            
            11,622
            
            
            10,369Intangible
                assets
            
            
            3
            
            
            3TOTAL
                ASSETS
            
            $
            28,306
            
            $
            108,131LIABILITIES
                AND STOCKHOLDERS’ DEFICITCURRENT
                LIABILITIESAccounts
                payable and accrued liabilities
            
            $
            72,110
            
            $
            35,007Due
                to shareholders
            
            
            1,271,932
            
            
            875,822Total
                current liabilities
            
            
            1,344,042
            
            
            910,829Stockholders'
                Deficit:Preferred
                stock, $0.001 par value, 20,000,000 shares
                authorized,1,250,000
                and 1,250,000 shares issued and outstanding
            
            
            1,250
            
            
            1,250Common
                stock, $0.001 par value, 300,000,000 shares
                authorized180,607,060and
                  106,747,060 shares issued and outstanding
            
            
            180,607
            
            
            106,747Additional
                paid-in capital
            
            
            15,363,037
            
            
            8,496,543Deferred
                compensation
            
            
            -
            
            
            (153,942
            )Deficit
                accumulated during the development stage
            
            
            (16,797,449
            )
            
            (9,193,377
            )Accumulated
                other comprehensive loss
            
            
            (63,181
            )
            
            (59,919
            )Total
                Stockholders’ Deficit
            
            
            (1,315,736
            )
            
            (802,698
            )TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIT
            
            $
            28,306
            
            $
            108,131




See
                Notes to Consolidated Financial Statements.




F-3




CHINA
                  HOLDING INC.(a
                  development stage company)CONSOLIDATED
                  STATEMENTS OF OPERATIONS
  Cumulative
                  results ofoperations
                  fromYear
                  Ended
              
              April
                  3, 2002 (Inception)2007
              
              2006
              
              to
                  December 30, 2007Sales
              
              $
              -
              
              $
              -
              
              $
              8,976Cost
                  of goods sold
              
              
              -
              
              
              -
              
              
              245Gross
                  profit
              
              
              -
              
              
              -
              
              
              8,731Expenses:Advertising
                  and promotion
              
              
              45,438
              
              
              6,045
              
              
              167,330Amortization
                  of intangible assets
              
              
              -
              
              
              -
              
              
              7,125Consulting
                  fees
              
              
              1,211,474
              
              
              1,018,937
              
              
              4,153,300Forfeit
                  payments on acquisitions and deposit
              
              
              1,415,000
              
              
              -
              
              
              1,415,000Depreciation
              
              
              3,448
              
              
              4,262
              
              
              12,616Interest
                  and bank charges
              
              
              102,805
              
              
              114,134
              
              
              290,399Investor
                  relations
              
              
              162,194
              
              
              96,856
              
              
              293,673Management
                  fees
              
              
              1,159,288
              
              
              1,004,948
              
              
              3,364,632Office
              
              
              16,337
              
              
              58,117
              
              
              100,949Professional
                  fees
              
              
              244,629
              
              
              259,130
              
              
              1,045,864Rent
              
              
              28,310
              
              
              21,327
              
              
              103,206Research
                  and development
              
              
              -
              
              
              -
              
              
              1,743,593Travel
              
              
              13,888
              
              
              12,654
              
              
              52,712Impairment
                  of licensing rights
              
              
              -
              
              
              -
              
              
              -Vehicle
              
              
              5,258
              
              
              18,099
              
              
              31,049Total
                  expenses
              
              
              4,408,069
              
              
              2,614,509
              
              
              12,781,448Net
                  loss from operations
              
              
              (4,455,889
              )
              
              (2,614,509
              )
              
              12,772,717Other
                  income (expenses)Foreign
                  exchange
              
              
              4,054
              
              
              13,142
              
              
              39,041Compensatory
                  element of stock
              
              
              3,214,457
              
              
              (762,865
              )
              
              (3,977,322
              )Impairment
                  of licensing rights
              
              
              -
              
              
              -
              
              
              (182,874
              )Gain
                  (loss) on settlement of debts and issuance of shares
              
              
              14,400
              
              
              167,156
              
              
              96,423Total
                  other income (expenses)
              
              
              3,196,003
              
              
              (582,567
              )
              
              (4,024,732
              )Net
                  loss
              
              $
              (7,604,072
              )
              $
              (3,197,076
              )
              $
              16,797,449Basic
                  net loss per share
              
              $
              (0.5
              )
              $
              (0.05
              )Weighted
                  average number of common basic
                  and diluted shares outstanding
              
              
              114,121,334
              
              
              69,701,749The
                  components of other comprehensive lossNet
                  loss
              
              $
              (7,604,072
              )
              $
              (3,197,076
              )Foreign
                  currency translation adjustment
              
              
              (3,262
              )
              
              (6,256
              )Comprehensive
                  loss
              
              $
              (7,607,334
              )
              $
              (3,203,332
              )
  See
                  Notes to Consolidated Financial Statements.






F-4




CHINA
                  HOLDINGS, INC.(a
                  development stage company)CONSOLIDATED
                  STATEMENT OF STOCKHOLDERS' DEFICIT
  DeficitAccumulated
              
              AccumulatedAdditional
              
              Deferred
              
              During
              
              OtherPreferred
                  Stock
              
              Common
                  Stock
              
              Paid-in
              
              Compensation
              
              Development
              
              ComprehensiveShares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              (Restated)
              
              Stage
              
              Loss
              
              TotalBalance,
                  April 3, 2002
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Issued
                  for cash at average of $0.0026 per share in June
                  2002
              
              
              -
              
              
              -
              
              
              22,895,000
              
              
              22,895
              
              
              35,805
              
              
              -
              
              
              -
              
              
              -
              
              
              58,700Net
                  loss for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (71,673
              )
              
              -
              
              
              (71,673
              )Currency
                  translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              532
              
              
              532Balance,
                  December 31, 2002
              
              
              -
              
              
              -
              
              
              22,895,000
              
              
              22,895
              
              
              35,805
              
              
              -
              
              
              (71,673
              )
              
              532
              
              
              (12,441
              )Issued
                  for cash at an average of $0.013 per share in November
                  2003
              
              
              -
              
              
              -
              
              
              2,530,000
              
              
              2,530
              
              
              29,770
              
              
              -
              
              
              -
              
              
              -
              
              
              32,300Issued
                  for debt at an average of $0.01 per share in November
                  2003
              
              
              -
              
              
              -
              
              
              3,650,000
              
              
              3,650
              
              
              32,850
              
              
              -
              
              
              -
              
              
              -
              
              
              36,500Issued
                  for consulting services at an average priceof
                  $0.076 per share in December 2003
              
              
              -
              
              
              -
              
              
              90,000
              
              
              90
              
              
              6,760
              
              
              -
              
              
              -
              
              
              -
              
              
              6,850Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (149,673
              )
              
              -
              
              
              (149,673
              )Currency
                  translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (10,590
              )
              
              (10,590
              )Balance,
                  December 31, 2003
              
              
              -
              
              
              -
              
              
              29,165,000
              
              
              29,165
              
              
              105,185
              
              
              -
              
              
              (221,346
              )
              
              (10,058
              )
              
              (97,054
              )-Issued
                  for cash at an average of $0.10 per share
              
              
              -
              
              
              -
              
              
              1,356,700
              
              
              1,357
              
              
              129,464
              
              
              -
              
              
              -
              
              
              -
              
              
              130,821Issued
                  for debt at $0.06 per share in February 2004
              
              
              -
              
              
              -
              
              
              310,000
              
              
              310
              
              
              18,490
              
              
              -
              
              
              -
              
              
              -
              
              
              18,800Issued
                  for consulting, professional and other
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -services
                  at an average price of $0.25 per share in August 2004
              
              
              -
              
              
              -
              
              
              1,791,000
              
              
              1,791
              
              
              453,374
              
              
              (203,125
              )
              
              -
              
              
              -
              
              
              252,040Issued
                  for consulting, professional and other
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -services
                  at an average price of $0.22 per share in October 2004
              
              
              -
              
              
              -
              
              
              375,000
              
              
              375
              
              
              80,625
              
              
              -
              
              
              -
              
              
              -
              
              
              81,000Issued
                  for consulting, professional and other
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -services
                  at an average price of $0.21 per share in November 2004
              
              
              -
              
              
              -
              
              
              65,000
              
              
              65
              
              
              13,585
              
              
              -
              
              
              -
              
              
              -
              
              
              13,650Issued
                  for intellectual property (Note 3) in May 2004
              
              
              -
              
              
              -
              
              
              2,200,000
              
              
              2,200
              
              
              189,107
              
              
              -
              
              
              -
              
              
              -
              
              
              191,307Issued
                  for licensing rights (Note 3) in November 2004
              
              
              -
              
              
              -
              
              
              760,000
              
              
              760
              
              
              189,240
              
              
              -
              
              
              -
              
              
              -
              
              
              190,000Exercise
                  of options an average of $0.13 per share in August
                  2004
              
              
              -
              
              
              -
              
              
              500,000
              
              
              500
              
              
              64,500
              
              
              -
              
              
              -
              
              
              -
              
              
              65,000Stock
                  based compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,050,000
              
              
              (140,625
              )
              
              -
              
              
              -
              
              
              909,375Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,098,276
              )
              
              -
              
              
              (2,098,276
              )Currency
                  translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,204
              )
              
              (1,204
              )Balance,
                  December 31, 2004
              
              
              -
              
              
              -
              
              
              36,522,700
              
              
              36,523
              
              
              2,293,570
              
              
              (343,750
              )
              
              (2,319,622
              )
              
              (11,262
              )
              
              (344,541
              )




F-5


CHINA
                    HOLDINGS, INC.(a
                    development stage company)CONSOLIDATED
                      STATEMENT OF STOCKHOLDERS' DEFICIT
  Preferred
                      Stock
                  
                  Common
                      Stock
                  
                  Additional
                    Paid-in
                  
                  Deferred
                    Compensation
                  
                  Deficit
                    Accumulated
                    During
                    Development
                  
                  Accumulated
                    Other
                    ComprehensiveShares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Capital
                  
                  (Restated)
                  
                  Stage
                  
                  Loss
                  
                  TotalIssued
                      for cash at an average of $0.25 per share in February 2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,080,000
                  
                  
                  1,080
                  
                  
                  268,920
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  270,000Issued
                      for intellectual rights at $0.30 per share in March 2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  4,500,000
                  
                  
                  4,500
                  
                  
                  1,345,500
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,350,000Issued
                      for consulting at an average of $0.31 per share in May
                      2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  400,000
                  
                  
                  400
                  
                  
                  123,600
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  124,000Issued
                      for consulting at an average of $0.31 per share in July
                      2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,190,000
                  
                  
                  1,190
                  
                  
                  367,710
                  
                  
                  (257,514
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  111,386Issued
                      for consulting at an average of $0.31 per share in September
                      2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  786,690
                  
                  
                  787
                  
                  
                  243,087
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  243,874Issued
                      for consulting at an average of $0.31 per share in October
                      2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  315,000
                  
                  
                  315
                  
                  
                  97,335
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  97,650Issued
                      for consulting at an average of $0.31 per share in December
                      2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,876,210
                  
                  
                  1,876
                  
                  
                  560,565
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  562,441Issued
                      to settle debt at $0.15 per share in December 2005
                  
                  
                  1,000,000
                  
                  
                  1,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  149,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  150,000Issued
                      to settle debt at $0.17 per share in December 2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  277,753
                  
                  
                  278
                  
                  
                  46,940
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  47,218Exercise
                      of options at $0.10 per share in December 2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  348,578
                  
                  
                  348
                  
                  
                  34,510
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  34,858Stock
                      based compensation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  344,667
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  344,667Finder's
                      fee paid
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (25,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (25,000
                  )Shares
                      cancelled at $0.25 per share
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (700,000
                  )
                  
                  (700
                  )
                  
                  (174,300
                  )
                  
                  175,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  0Amortize
                      deferred compensation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  168,750
                  
                  
                  -
                  
                  
                  -
                  
                  
                  168,750Net
                      loss
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (3,676,679
                  )
                  
                  -
                  
                  
                  (3,676,679
                  )Currency
                      translation adjustment
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (42,401
                  )
                  
                  (42,401
                  )Balance,
                    December 31, 2005
                  
                  
                  1,000,000
                  
                  
                  1,000
                  
                  
                  46,596,931
                  
                  
                  46,597
                  
                  
                  5,676,104
                  
                  
                  (257,514
                  )
                  
                  (5,996,301
                  )
                  
                  (53,663
                  )
                  
                  (583,777
                  )


F-6




CHINA
                    HOLDINGS, INC.(a
                    development stage company)CONSOLIDATED
                      STATEMENT OF STOCKHOLDERS' DEFICIT
  Preferred
                      Stock
                  
                  Common
                      Stock
                  
                  Additional
                    Paid-in
                  
                  Deferred
                    Compensation
                  
                  Deficit
                    Accumulated
                    During
                    Development
                  
                  Accumulated
                    ther
                    ComprehensiveShares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Capital
                  
                  (Restated)
                  
                  Stage
                  
                  Loss
                  
                  TotalIssued
                      for deferred compensation at an average price $0.129 per share
                      in January
                      2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,134,710
                  
                  
                  1,135
                  
                  
                  146,030
                  
                  
                  (147,165
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Issued
                      for deferred compensation at an average price $0.141 per share
                      in February
                      2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  540,000
                  
                  
                  540
                  
                  
                  75,960
                  
                  
                  (76,500
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Issued
                      for consulting, professional and other servicesat
                      an average price $0.137 per share in February 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  100,000
                  
                  
                  100
                  
                  
                  10,900
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  11,000Stock
                      dividend 1 for 4 in February 2006
                  
                  
                  250,000
                  
                  
                  250
                  
                  
                  12,170,419
                  
                  
                  12,170
                  
                  
                  (12,420
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Issued
                      for consulting, professional and other servicesat
                      an average price $0.102 per share in April 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  950,000
                  
                  
                  950
                  
                  
                  96,300
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  97,250Issued
                      for consulting, professional and other servicesat
                      an average price $0.10 per share in May 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  250,000
                  
                  
                  250
                  
                  
                  24,750
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  25,000Issued
                      for consulting, professional and other servicesat
                      an average price $0.095 per share in June 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  750,000
                  
                  
                  750
                  
                  
                  70,500
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  71,250Stock
                      issued as donation at $0.03 per share in September
                  
                  
                  -
                  
                  
                  -
                  
                  
                  100,000
                  
                  
                  100
                  
                  
                  2,900
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  3,000Stock
                      issued for deferred compensation$0.033
                      per share in September 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  3,150,000
                  
                  
                  3,150
                  
                  
                  120,225
                  
                  
                  (123,375
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Issued
                      for consulting, professional and other servicesat
                      an average price $0.039 per share in September 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,665,000
                  
                  
                  2,665
                  
                  
                  98,785
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  101,450Issued
                      for prepaid expenses in September
                  
                  
                  -
                  
                  
                  -
                  
                  
                  400,000
                  
                  
                  400
                  
                  
                  11,600
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  12,000Stock
                      issued to settle debt at average price$0.03
                      per share in October 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  10,000,000
                  
                  
                  10,000
                  
                  
                  290,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  300,000Issued
                      for consulting, professional and other servicesat
                      an average price $0.036 per share in October 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  500,000
                  
                  
                  500
                  
                  
                  15,250
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  15,750Issued
                      for prepaid expenses in October 2006
                  
                  
                  
                  
                  
                  
                  
                  
                  3,000,000
                  
                  
                  3,000
                  
                  
                  108,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  111,000Stock
                      issued to settle debt at average price$0.025
                      per share in November 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,750,000
                  
                  
                  1,750
                  
                  
                  42,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  43,750Issued
                      for consulting, professional and other servicesat
                      an average price $0.025 per share in November 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  7,585,000
                  
                  
                  7,585
                  
                  
                  182,040
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  189,625Stock
                      issued to settle debt at average price$0.025
                      per share in December 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,700,000
                  
                  
                  1,700
                  
                  
                  40,800
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  42,500Issued
                      for consulting, professional and other servicesat
                      an average price $0.025 per share in December 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  14,280,000
                  
                  
                  14,280
                  
                  
                  345,470
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  359,750Cancellation
                      of stock and associated dividend
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (875,000
                  )
                  
                  (875
                  )
                  
                  (174,125
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (175,000
                  )Stockoptions
                      compensation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  562,609
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  562,609Amortization
                      of deferred expense
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  450,612
                  
                  
                  
                  
                  
                  
                  
                  
                  450,612Issue
                      of warrants for service
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  762,865
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  762,865Net
                      loss
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (3,197,076
                  )
                  
                  -
                  
                  
                  (3,197,076
                  )Currency
                      translation adjustment
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (6,256
                  )
                  
                  (6,256
                  )Balance,
                      December 31, 2006
                  
                  
                  1,250,000
                  
                  
                  1,250
                  
                  
                  106,747,060
                  
                  
                  106,747
                  
                  
                  8,496,543
                  
                  
                  (153,942
                  )
                  
                  (9,193,377
                  )
                  
                  (59,919
                  )
                  
                  (802,698
                  )


F-7




CHINA
      HOLDINGS, INC.


(a
        development stage company)
 CONSOLIDATED
          STATEMENT OF STOCKHOLDERS' DEFICIT


Preferred
                          Stock
                      
                      Common
                          Stock
                      
                      Additional
                          Paid-in
                      
                      Deferred
                          Compensation
                      
                      Deficit
                          Accumulated During Development
                      
                      Accumulated
                          Other ComprehensiveShares
                      
                      Amount
                      
                      Shares
                      
                      Amount
                      
                      Capital
                      
                      (Restated)
                      
                      Stage
                      
                      Loss
                      
                      Total
 Issued
                                      for consulting, professional and other services
                                      at anaverage
                                      price $0.045 per share in 2007
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  35,376,400
                                  
                                  
                                  35,376
                                  
                                  
                                  1,579,161
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  1,614,537Issued
                                      for assets/acquisition payments deposits at
                                      anaverage
                                      price $0.07 per share in 2007
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  20,200,000
                                  
                                  
                                  20,200
                                  
                                  
                                  1,394,800
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  1,415,000Cancellation
                                      of stock and associated dividend
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  (1,496,400
                                  )
                                  
                                  (1,496
                                  )
                                  
                                  1,496
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  -Issued
                                      to settle debt at an average price $0.059 per
                                      share in
                                      2007
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  5,400,000
                                  
                                  
                                  5,400
                                  
                                  
                                  314,600
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  320,000
 $0.050
                          per share in November 2007
                      
                      
                      1,250,000
                      
                      
                      1,250
                      
                      
                      106,747,060
                      
                      
                      106,747
                      
                      
                      8,496,543
                      
                      
                      (153,942
                      )
                      
                      (9,193,377
                      )
                      
                      (59,919
                      )
                      
                      (802,698
                      )Issued
                            to purchase via PP /144 rules at $0.050 per share in November
                            2007
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,000,000
                      
                      
                      1,000
                      
                      
                      49,000
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      50,000Issued
                            to cover loss for financing for the company at anaverage
                            price 0.024 per share in 2007
                      
                      
                      -
                      
                      
                      -
                      
                      
                      13,380,000
                      
                      
                      13,380
                      
                      
                      312,980
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      326,360Stockoptions
                          compensation
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      338,180
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      338,180Amortization
                          of deferred expense
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      153,942
                      
                      
                      -
                      
                      
                      -
                      
                      
                      153,942Issue
                          of warrants for services
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      2,876,277
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      2,876,277Stock
                          based compensation
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Net
                          loss
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      (7,604,072
                      )
                      
                      -
                      
                      
                      (7,604,072
                      )Currency
                          translation adjustment
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      (3,262
                      )
                      
                      (3,262
                      )Balance,
                          December 31, 2007
                      
                      
                      1,250,000
                      
                      $
                      1,250
                      
                      
                      180,607,060
                      
                      $
                      180,607
                      
                      $
                      15,363,037
                      
                      $
                      0
                      
                      $
                      (16,797,449
                      )
                      $
                      (63,181
                      )
                      $
                      (1,315,736
                      )


F-8




CHINA
                  HOLDING INC.(a
                  development stage company)CONSOLIDATED
                  STATEMENTS OF CASH FLOWS
 
 Cumulative
                      results ofoperations
                      fromYear
                      Ended
                  
                  April
                      3, 2002 (Inception)2007
                  
                  2006
                  
                  to
                      December 30, 2007OPERATING
                      ACTIVITIESNet
                      loss
                  
                  $
                  (7,604,072
                  )
                  $
                  (3,197,076
                  )
                  $
                  (16,797,449
                  )Adjustments
                      to reconcile net loss to cash usedin
                      operating activities:Accrued
                      interest
                  
                  
                  -
                  
                  
                  111,410
                  
                  
                  181,570Amortization
                      of intangible assets
                  
                  
                  -
                  
                  
                  -
                  
                  
                  7,125Deferred
                      compensation expensed
                  
                  
                  153,942
                  
                  
                  -
                  
                  
                  153,942Stock
                      options issued for services
                  
                  
                  338,180
                  
                  
                  562609
                  
                  
                  900,789Depreciation
                  
                  
                  3,448
                  
                  
                  4,262
                  
                  
                  12,616Impairment
                      of licensing rights
                  
                  
                  -
                  
                  
                  -
                  
                  
                  182,874License
                      rights
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,359,999(Gain)
                      loss on settlement of debt and issuance of shares
                  
                  
                  (14,400
                  )
                  
                  (175,000
                  )
                  
                  (104,924
                  )Non
                      cash expenses paid with shares
                  
                  
                  -
                  
                  
                  874,076
                  
                  
                  3,203,590Non
                      cash interest paid with shares
                  
                  
                  326,360
                  
                  
                  -
                  
                  
                  326,360Stock-based
                      compensation for services
                  
                  
                  1,614,537
                  
                  
                  450,612
                  
                  
                  3,319,191Warrant
                      issued for Compensation
                  
                  
                  2,876,277
                  
                  
                  762,865
                  
                  
                  3,639,142Prior
                      year issuance of shares Cancelled
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Stock
                      issued for acquisitions - expensed
                  
                  
                  1,415,000
                  
                  
                  -
                  
                  
                  1,415,000Changes
                      in operating assets and liabilities
                  
                  
                  
                  
                  
                  
                  
                  
                  -Prepaid
                      expenses
                  
                  
                  91,036
                  
                  
                  30,367
                  
                  
                  144,411Accounts
                      payable and accrued liabilities
                  
                  
                  37,103
                  
                  
                  1,221
                  
                  
                  80,490Net
                      cash used in operating activities
                  
                  
                  (762,589
                  )
                  
                  (574,654
                  )
                  
                  (1,975,274
                  )INVESTING
                      ACTIVITIESPurchase
                      of equipment
                  
                  
                  (4,701
                  )
                  
                  -
                  
                  
                  (4,701
                  )Purchase
                      deposit for acquisition of companies
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (19,536
                  )Net
                      cash used in investing activities
                  
                  
                  (4,701
                  )
                  
                  -
                  
                  
                  (24,237
                  )FINANCING
                      ACTIVITIESProceeds
                      from issuance of common stock
                  
                  
                  50,000
                  
                  
                  -
                  
                  
                  50,000Net
                      advances from shareholders
                  
                  
                  730,510
                  
                  
                  566,023
                  
                  
                  2,022,649Net
                      cash provided by financing activities
                  
                  
                  780,510
                  
                  
                  566,023
                  
                  
                  2,072,649EFFECT
                      OF EXCHANGE RATE CHANGES
                  
                  
                  (3,262
                  )
                  
                  (6,256
                  )
                  
                  (63,180
                  )NET
                      (DECREASE) INCREASE IN CASH
                  
                  
                  9,958
                  
                  
                  (14,887
                  )
                  
                  9,958CASH,
                      BEGINNING OF YEAR
                  
                  
                  -
                  
                  
                  14,887
                  
                  
                  -CASH,
                      END OF YEAR
                  
                  $
                  9,958
                  
                  $
                  -
                  
                  $
                  9,958Supplemental
                      disclosures of cash flows information:Interest
                      paid
                  
                  $
                  
                  
                  $Taxes
                      paid
                  
                  $
                  
                  
                  $Non-cash
                      financing activities:Settlement
                      of debt in common stock
                  
                  $
                  320,000
                  
                  $$
                  
                  
                  $
 See
                  Notes to Consolidated Financial Statements.




F-9




**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**


NOTES
      TO
      CONSOLIDATED AUDITED FINANCIAL STATEMENTS


DECEMBER
      31, 2007




**1.**
            **NATURE
                OF OPERATIONS AND BASIS OF
                PRESENTATION**




China
      Holdings Inc. (the "Company") is a Nevada company incorporated on April 3,
      2002
      as AE&E Pharma Corporation. The Company changed its name to China Holdings,
      Inc. on May 1st, 2007. The Company has had nominal revenues since our
      inception





On
      April
      3, 2002, the Company was incorporated under the laws of the State of Nevada
      under the name AE&E Pharma Corporation and changed our name on May 25, 2004,
      to China Health Holding, Inc. On May 1, 2007, the Company changed our name
      to
      China Holdings, Inc. Effective May 11, 2007, and the Company stock trades under
      the symbol CHHL on the OTC Bulletin Board. The Company maintains a website
      at www.chinaholding.net .
      We have
      had nominal revenues since our inception.





The
      Company has three wholly-owned subsidiaries: (i) China Power, Inc., (ii) China
      Minerals Holdings, Inc., and (iii) China Health Holdings, Inc.





On
      May 1,
      2007, the Company’s wholly owned subsidiary, China Health World Pharmaceutical
      Corporation, amended its Articles of Incorporation to change its name to China
      Health Holdings, Inc and on May 9, 2007, the Company’s wholly owned subsidiary
      China Health World Trade Corporation amended its Articles of Incorporation
      to
      change its name to China Power, Inc. On January 7 th ,
      2008,
      the Company incorporated 3 rd subsidiary: China Minerals Holdings, Inc. under Nevada State Laws.





On
      May 1,
      2007, the Company amended its Articles of Incorporation to change its name
      to
      "China Holdings, Inc."




The
      Company’s initial business plan was to engage in the manufacturing, marketing
      and distribution of proprietary natural medicinal products. The Company has
      since revised their business plan to not only focus on becoming a manufacturing,
      marketer and distributor of natural medicinal products, but also focus on
      becoming a diversified global assets holding company.





The
      Company and their subsidiaries intend to engage in multiple China-focused
      business activities including, energy, renewable energy, resources, utilities
      finance, real estate, and pharmaceutical. Their objective is to achieve
      long-term capital appreciation through investment in companies and other
      entities with significant assets, investments, production activities, trading
      or
      other business interests in China or worldwide.





Certain
      reclassifications have been made to prior year amounts to conform to the current
      year presentation.





**2.**
            **SIGNIFICANT
                ACCOUNTING POLICIES**





a)
            Basis
                of presentation





These
      consolidated financial statements have been presented in U.S. dollars and
      prepared in accordance with generally accepted accounting principles in the
      United States. The Company’s year end is December 31.


The
        financial statements have been prepared on the basis of a going concern which
        contemplates the realization of assets and the satisfaction of liabilities
        in
        the normal course of business. The Company has a working capital deficiency
        of
        $1,327,361 (and an accumulated deficit of $16,797,449 and a stockholders’
deficit of $1,315,736 as December 31, 2007 and has incurred significant
        losses since inception. Further losses are anticipated in the development
        of its
        intended business plan. If the Company is unable to obtain financing in the
        amounts and on terms deemed acceptable, the business and future success may
        be
        adversely affected. Given the Company's limited operating history, lack of
        sales, and its operating losses, there can be no assurance that it will be
        able
        to achieve or maintain profitability. Accordingly, these factors raise
        substantial doubt about the Company’s ability to continue as a going
        concern.


The
      Company will depend almost exclusively on outside capital to complete the
      development of its intellectual property, and marketing of its products. Such
      outside capital will include proceeds from the issuance of equity securities
      and
      may include commercial borrowing. There can be no assurance that capital will
      be
      available as necessary to meet these development costs or, if the capital is
      available, that it will be on terms acceptable to the Company.





The
      issuances of additional equity securities by the Company may result in a
      significant dilution in the equity interests of its current stockholders.
      Obtaining commercial loans, assuming those loans would be available, will
      increase the Company's liabilities and future cash commitments.





b)
            Consolidation





The
      audited condensed consolidated financial statements include the accounts of
      the
      Company and its three (3) wholly-owned subsidiaries, China Power, Inc., China
      Minerals Holdings, Inc. and China Health Holdings, Inc. Those subsidiaries
      have
      not yet commenced operations and have no significant assets, liabilities,
      revenues or expenses. "All intercompany accounts have been eliminated in
      consolidation".




F-10




c)
            Use
                of estimates and assumptions





Preparation
      of the Company’s condensed consolidated financial statements in conformity with
      accounting principles generally accepted in the United States requires
      management to make estimates and assumptions that affect certain reported
      amounts and disclosures. Accordingly, actual results could differ from those
      estimates.




d)
            Property
                and equipment





Fixed
      assets are stated at cost. Depreciation is computed at the following rates
      over
      the estimated useful lives of the assets:





Computer
      - 30% declining balance


Furniture
      and fixtures - 20% declining balance





e)
            Net
                loss per common share





Basic
      loss per share includes no dilution and is computed by dividing income available
      to common stockholders by the weighted average number of common shares
      outstanding for the period. Dilutive loss per share reflects the potential
      dilution of securities that could share in the earnings of the Company. The
      accompanying presentation is only of basic loss per share as the potentially
      dilutive factors are anti-dilutive to basic loss per share.





f)
            Fair
                value of financial instruments





In
      accordance with the requirements of SFAS No.107, **“** Disclosures
      about Fair Value of Financial Instruments”, the Company has determined the
      estimated fair value of financial instruments using available market information
      and appropriate valuation methodologies. The fair value of financial instruments
      classified as current assets or liabilities including cash, accounts payable
      and
      amounts due to shareholders, approximate carrying value due to the short-term
      maturity of the instruments.





g)
            Intangible
                assets





The
      Company has adopted the provision of the Statement of Financial Accounting
      Standards (“SFAS”) No.142, “Goodwill and Intangible Assets”, which revises the
      accounting for purchased goodwill and intangible assets. Under SFAS No. 142,
      goodwill and intangible assets with indefinite lives are no longer amortized
      and
      are to be tested for impairment annually or whenever events or circumstances
      indicate that the estimated fair value is less than the related carrying value
      as determined on a reporting unit basis. The determination of any impairment
      would include a comparison of estimated future operating cash flows anticipated
      during the remaining life with the net carrying value of the asset as well
      as a
      comparison of the fair value to book value of the Company. Prior to the year
      ended December 31, 2006 Company management has determined that it is was not
      possible to estimate future cash flows from their intangible assets and
      accordingly these intangibles were reduced to a value of $1 per intangible
      for a
      total of $3 in intangible assets.




h)
            Foreign
                currency translation





The
      Company’s functional currency is the Canadian dollar and Chinese Yuan Renminbi.
      The financial statements are translated to United States dollars in accordance
      with SFAS No. 52, “Foreign Currency Translation”, using period-end rates of
      exchange for assets and liabilities, and average rates of exchange for the
      year
      for revenues and expenses. Translation gains (losses) are recorded in
      accumulated other comprehensive income (loss) as a component of stockholders’
deficit. Gains and losses arising on translation or settlement of foreign
      currency denominated transactions or balances are included in the
      determination of income. Foreign currency transactions are primarily undertaken
      in Canadian dollars. The Company has not, to the date of these consolidated
      financials statements, entered into derivative instruments to offset the impact
      of foreign currency fluctuations.





i)
            Income
                taxes





The
      Company follows SFAS No. 109, “Accounting for Income Taxes”, using the liability
      method of accounting for income taxes. Under this method, deferred income tax
      assets and liabilities are recognized for the estimated tax consequences
      attributable to differences between the financial statement carrying values
      and
      their respective income tax basis (temporary differences). The effect on
      deferred income tax assets and liabilities of a change in tax rates is
      recognized in income in the period that includes the enactment date. At December
      31, 2007, a full deferred tax asset valuation allowance has been provided and
      no
      deferred tax asset benefit has been recorded.





j)
            Stock-based
                compensation


Effective
        January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), "Share-Based
        Payment, "
        under
        the modified prospective method. SFAS No. 123(R) eliminates accounting for
        share-based compensation transactions using the intrinsic value method
        prescribed under APB Opinion No. 25
        "Accounting for Stock Issued to Employees, "
        and
        requires instead that such transactions be accounted for using a
        fair-value-based method. Under the modified prospective method, the Company
        is
        required to recognize compensation cost for share-based payment to employees
        based on their grant date fair value from the beginning of the fiscal period
        in
        which the recognition provisions are first applied. For periods prior to
        adoption, the financial statements are unchanged, and the pro forma disclosures
        previously required by SFAS No. 123, as amended by SFAS No. 148, will continue
        to be required under SFAS No. 123(R) to the extent those amounts differ from
        those in the Statement of Operations.
  During
        2007 and 2006, the Company granted 0 and 6,650,000 options, respectively
        to
        employees that were accounted for pursuant to SFAS No. 123(R) and 123,
        respectively.
  During
        2007 and 2006, the Company granted 45,000,000 and 31,650,000 warrants,
        respectively to non-employees that were accounted for pursuant to SFAS No.
        123(R) and 123, respectively.
  See
        detailed discussion of stock based compensation in Note 7.


F-11




k)
            Recent
                accounting pronouncements





·
            In
                September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
                (“SFAS 157”). SFAS No. 157 defines fair value, establishes a
                framework for measuring fair value in accordance with generally accepted
                accounting principles, and expands disclosures about fair value
                measurements. This statement does not require any new fair value
                measurements; rather, it applies under other accounting pronouncements
                that require or permit fair value measurements. The provisions of
                this
                statement are to be applied prospectively as of the beginning of
                the
                fiscal year in which this statement is initially applied, with any
                transition adjustment recognized as a cumulative-effect adjustment
                to the
                opening balance of retained earnings. The provisions of SFAS 157
                are
                effective for the fiscal years beginning after November 15, 2007.
                Therefore, the Company anticipates adopting this standard as of
                January 1, 2008. Management has not determined the effect, if any,
                the adoption of this statement will have on the Company’s financial
                condition or results of operations.




·
            In
                September 2006, the FASB issued Statement No. 158,*“Employers’
                Accounting for Defined Benefit Pension and Other Postretirement
                Plans”*(“SFAS No. 158”), an amendment of FASB Statements No. 87,
                88, 106 and 132(R). SFAS No. 158 requires (a) recognition
                of the funded status (measured as the difference between the fair
                value of
                the plan assets and the benefit obligation) of a benefit plan as
                an asset
                or liability in the employer’s statement of financial position,
                (b) measurement of the funded status as of the employer’s fiscal
                year-end with limited exceptions, and (c) recognition of changes in
                the funded status in the year in which the changes occur through
                comprehensive income. The requirement to recognize the funded status
                of a
                benefit plan and the disclosure requirements are effective as of
                the end
                of the fiscal year ending after December 15, 2006. The requirement to
                measure the plan assets and benefit obligations as of the date of
                the
                employer’s fiscal year-end statement of financial position is effective
                for fiscal years ending after December 15, 2008. This Statement has
                no current applicability to the Company’s financial statements. Management
                does not expect the adoption of SFAS No. 158 to have a material
                impact on the Company’s future financial position, results of operations,
                or cash flows.****




·
            In
                February 2007, the FASB issued Statement No. 159 “The Fair Value Option
                for Financial Assets and Financial Liabilities” (SFAS 159). This statement
                permits companies to choose to measure many financial assets and
                liabilities at fair value. Unrealized gains and losses on items for
                which
                the fair value option has been elected are reported in earnings.
                SFAS 159
                is effective for fiscal years beginning after November 15, 2007.
                The
                Company is currently assessing the impact of SFAS 159 on its consolidated
                financial statements.





·
            In
                December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
                Combinations” (“SFAS 141(R)”). SFAS 141(R) will change the accounting for
                business combinations. Under SFAS No. 141(R), an acquiring entity
                will be required to recognize all the assets acquired and liabilities
                assumed in a transaction at the acquisition-date fair value with
                limited
                exceptions. SFAS No. 141(R) will change the accounting treatment and
                disclosure for certain specific items in a business combination.
                SFAS
                No. 141(R) applies prospectively to business combinations for which
                the acquisition date is on or after the beginning of the first annual
                reporting period beginning on or after December 15, 2008. SFAS 141(R)
                will impact the Company in the event of any future
                acquisition.




·
            In
                December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
                Consolidated Financial Statements—an amendment of Accounting Research
                Bulletin No. 51” (“SFAS 160”). SFAS 160 establishes new accounting and
                reporting standards for the non-controlling interest in a subsidiary
                and
                for the deconsolidation of a subsidiary. SFAS No. 160 is effective
                for fiscal years beginning on or after December 15, 2008. The Company
                does not believe that SFAS 160 will have a material impact on its
                consolidated financial statements.




·
            In
                March 2008, the FASB issued SFAS No. 161, “Disclosures about
                Derivative Instruments and Hedging Activities—an amendment of FASB
                Statement No. 133” (“FAS 161”). FAS 161 changes the disclosure
                requirements for derivative instruments and hedging activities. Entities
                are required to provide enhanced disclosures about (a) how and why an
                entity uses derivative instruments, (b) how derivative instruments
                and related hedged items are accounted for under Statement 133 and
                its
                related interpretations, and (c) how derivative instruments and
                related hedged items affect an entity’s financial position, financial
                performance, and cash flows. The guidance in FAS 161 is effective
                for
                financial statements issued for fiscal years and interim periods
                beginning
                after November 15, 2008, with early application encouraged. This
                Statement encourages, but does not require, comparative disclosures
                for
                earlier periods at initial adoption. The Company is currently assessing
                the impact of FAS 161.





**3.**
            **INTANGIBLE
                ASSETS**





The
      Company has acquired a total of three intangible assets in the years ended
      December 31, 2004 and 2005. All these intangibles have been written down to
      $1
      as of December 31, 2006 and 2007.




a)
            Asset
                purchase agreement





Pursuant
      to an asset purchase agreement dated May 1, 2004, the Company acquired from
      the
      Company’s President, and a significant shareholder, proprietary rights and
      formulas to the 26 natural herbal medicinal products that comprise the King
      of
      Herbs and Taoist Medicine product lines. For accounting purposes, the Company
      has recorded the cost of acquiring the proprietary rights and formulas as
      intangible assets at the related party vendor’s carrying value of $1. The excess
      of the purchase price over the carrying value of the intangible assets totaling
      $366,306 was expensed as research and development costs during the year ended
      December 31, 2004.




F-12




b)
            Licensing
                rights agreement





In
      the
      year ended December 31, 2004 the Company entered into various agreements with
      Hotway Nutraceuticals Canada Co., Ltd. (“Hotway”), a British Columbia company.
      These agreements resulted in intangibles to the Company. These intangibles
      were
      written down to $1 in the year ended December 31, 2004.





c)
            Asset
                purchase agreement





Pursuant
      to an asset purchase agreement dated March 22, 2005, the Company acquired from
      the Company’s shareholders intellectual rights to 108 “100% Natural Taoist
      Herbal Medicinal Products”. For accounting purposes, the Company has recorded
      the cost of acquiring the intellectual rights as intangible assets at the
      related party vendor's carrying value of $1. The excess of the purchase price
      over the carrying value of the intangible assets totaling $1,359,999 was
      expensed as research and development costs during the year ended December 31,
      2005.




**4.**
            **PROPERTY
                AND EQUIPMENT**





December
                31,2007
            
            2006Computer
            
            $
            20,846
            
            $
            16,668Furniture
                & Fixtures
            
            
            3,392
            
            
            2,849Less:
                accumulated depreciation
            
            
            (12,616
            )
            
            (9,168
            )$
            11,622
            
            $
            10,369





Depreciation
      expense amounted to $3,448 and $4,262 for
      the
      years ended December 31, 2007 and 2006, respectively.





**5.**
            **DUE
                TO SHAREHOLDERS**





The
      Company has received advances from its shareholder which bears interest at
      10%
      per annum with no specific repayment terms. The amounts outstanding were
      $1,271,932 as December 31 2007 which due to Julianna Lu, the Company’s
      CEO/Founder/Chairwoman for a total of $974,448, and also due to Xiaofei Yu,
      the
      Company’s Vice Chairman for **** or
      a
      total of $297,484 **** as
      December 31 2007. ****





As
      of
      December 31, 2006, the $875,822 due to shareholders bears interest at 10% per
      annum, is unsecured and has no specific terms of repayment.





Accrued
      interest expense to directors and shareholders for the Years ended December
      31,
      2007 and 2006 was $102,032
      and $111,410, respectively.




**6.**
            **CAPITAL
                STOCK**





The
      authorized capital of the Company consists of 2,000,000,000 voting common shares
      with $0.001 par value and 20,000,000 voting preferred shares with $0.001 par
      value. On March 28, 2005, the Company increased the authorized common shares
      from 55,000,000 shares to 300,000,000 shares. On Feb 22, 2008 the Company
      increased the authorized common shares from 300,000,000 shares to 2,000,000,000
      shares.





On
      February 21, 2006, the Company filed a Certificate of Designation, Powers
      Preferences and Rights of Series A preferred stock which authorized the Company
      to issue up to 1,000,000 shares of Series A preferred stock with a par value
      of
      $0.001 per share. The Series A preferred stock has a stated value of $0.15
      per
      share and a liquidation preference over the Company’s common stock. Holders of
      Series A preferred stock are entitled to two votes for each share of Series
      A
      preferred stock owned. Each share of Series A preferred stock is convertible,
      at
      the option of the holder, into two shares of common stock, commencing two years
      after the date of issuance, provided the market price of the common stock is
      not
      below $1.00 per share. Additionally, if prior to two years from the date of
      issue, there is a sale or other disposition of all or substantially all of
      the
      Company’s assets, a transaction or series of related transactions in which more
      than 50% of the voting power of the Company is disposed of, or upon a
      consolidation, merger or other business combination where the Company is not
      the
      survivor, then immediately prior to such event each holder of Series A preferred
      stock may convert any or all of such holder's shares of Series A preferred
      stock
      into common stock. On September 16, 2006 the Company approved an increase in
      the
      number of authorized Series A Preferred stock to 2,500,000 with the same par
      value.




Year
      Ended December 31, 2007:





·
            At
                various times during the year ended December 31, 2007 the Company
                issued
                35,376,400 shares of common stock for services rendered at an aggregate
                market value of $0.045 per share for a total value of
                $1,614,537.





·
            At
                various times during the year ended December 31, 2007 the Company
                issued
                20,200,000 shares of common stock for acquisition deposits at an
                aggregate
                market value of $0.07 per share for a total value of $1,415,000.
                All these
                acquisition deposits have been expensed as of December 31, 2007 as
                the
                Company is unable to determine if any of these acquisitions can be
                consummated.




F-13




·
            At
                various times during the year ended December 31, 2007 the Company
                issued
                5,400,000 shares of common stock for settlement of debt with an aggregate
                market value of $0.059 per share for a total value of $320,000. The
                Company recorded a gain on settlement of debt in the amount of
                $14,400





·
                  
                  At
                      various times during the year ended December 31, 2007 the Company
                      issued
                      13,380,000 shares of common stock to cover loss for financing
                      with an
                      aggregate market value of $0.024 per share for a total value
                      of $326,360.





·
                  
                  On
                      November 1, 2007 the Company sold 1,000,000 shares of common stock to
                      purchase via PP/144 rules at $0.050 per share for a total value of
                      $50,000.




·
                  
                  At
                      various times during the year ended December 31, 2007 the Company
                      cancelled 1,496,400 shares of common stock and associated dividend
                      with an
                      aggregate market value of $0.000 per share for a total value
                      of
                      $0.000.




Year
      Ended December 31, 2006:





During
      the period ended December 31, 2006, the Company issued a total of 27,180,000
      common shares for services at an average of $0.032 per share for a total
      consideration of $871,075.





On
      February 16, 2006, the Company declared a stock dividend on the basis of one
      new
      share of common stock for every four shares of common stock outstanding, and
      one
      share of Series A preferred stock for every four shares of Series A preferred
      stock outstanding. The record date was February 28, 2006 and the payment date
      was March 17, 2006.




During
      the year the year ended December 31, 2006 the Company issued 4,824,710 common
      shares at an average price of $0.072 for deferred compensation for
      $347,040.




During
      the year ended December 31, 2006 the Company issued 13,450,000 common shares
      against the issuances of debt and accounts payable at an average rate of $0.029
      for cosultation services of $386,250.




During
      the year the Company issued 3,400,000 common shares at an average rate of $0.036
      applied against pre-paid expenses of $123,000





On
      December 30, 2006, the Company issued 2,000,000 shares of common stock with
      a
      fair value of $.025 per share for consulting services; $50,000 is included
      in
      consulting services for 2006.




On
      December 30, 2006, the Company issued 1,000,000 shares of common stock with
      a
      fair value of $.025 per share for consulting services; $25,000 is included
      in
      consulting services for 2006.





On
      December 30, 2006, the Company issued 300,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $7,500 is included in
      consulting services for 2006.





On
      December 30, 2006, the Company issued 150,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $3,750 is included in
      consulting services for 2006.





On
      December 30, 2006, the Company issued 800,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $20,000 is included in
      consulting services for 2006.





On
      December 29, 2006, the Company cancelled 875,000 shares of common stock with
      a
      fair value of $.025 per share due to cancellation of services.





On
      December 29, 2006, the Company issued 880,000 shares of common stock with a
      fair
      value of $.025 per share to settle $22,000 of debt.





On
      December 28, 2006, the Company issued 3,800,000 shares of common stock with
      a
      fair value of $.025 per share to settle $95,000 of debt.





On
      December 28, 2006, the Company issued 700,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $17,500 is included in
      consulting services for 2006.





On
      December 28, 2006, the Company issued 1,000,000 shares of common stock with
      a
      fair value of $.025 per share for consulting services; $25,000 is included
      in
      consulting services for 2006.





On
      December 18, 2006, the Company issued 300,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $7,500 is included in
      consulting services for 2006.





On
      December 18, 2006, the Company issued 150,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services ; $7,500 is included in
      consulting services for 2006.




F-14




On
      December 18, 2006, the Company issued 150,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $7,500 is included in
      consulting services for 2006.





On
      December 14, 2006, the Company issued 150,000 shares of common stock with a
      fair
      value of $.026 per share for Legal services; $3,900 is included in professional
      fees for 2006.





On
      December 12, 2006, the Company issued 300,000 shares of common stock with a
      fair
      value of $.026 per share for consulting services; $7,800 is included in
      consulting services for 2006.





On
      December 12, 2006, the Company issued 300,000 shares of common stock with a
      fair
      value of $.026 per share for consulting services; $7,800 is included in
      consulting services for 2006.





On
      December 12, 2006, the Company issued 1,000,000 shares of common stock with
      a
      fair value of $.026 per share for Legal services; $26,000 is included in
      professional fees for 2006.





On
      December 12, 2006, the Company issued 1,000,000 shares of common stock with
      a
      fair value of $.026 per share for consulting services ; $26,000 is included
      in
      consulting services.





On
      December 1, 2006, the Company issued 2,000,000 shares of common stock with
      a
      fair value of $.025 per share for consulting services; $50,000 is included
      in
      consulting fees for 2006.





On
      November 27, 2006, the Company issued 150,000 shares of common stock with a
      fair
      value of $.025 per share for Legal services; $3,750 is included in professional
      fees for 2006.




On
      November 27, 2006, the Company issued 100,000 shares of common stock with a
      fair
      value of $.025 per share for Legal services; $2,500 is included in professional
      fees for 2006.





On
      November 26, 2006, the Company issued 1,500,000 shares of common stock with
      a
      fair value of $.025 per share to settle debt of $37,500 in 2006.





On
      November 26, 2006, the Company issued 550,000 shares of common stock with a
      fair
      value of $.025 per share for Legal services; $13,750 is included in professional
      fees for 2006.





On
      November 21, 2006, the Company issued 450,000 shares of common stock with a
      fair
      value of $.025 per share for Legal services; $11,250 is included in professional
      fees for 2006.





On
      November 21, 2006, the Company issued 150,000 shares of common stock with a
      fair
      value of $.025 per share for management services; $3,750 is included in
      management fee for 2006.





On
      November 21, 2006, the Company issued 125,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $3,750 is included in
      consulting fees for 2006.





On
      November 21, 2006, the Company issued 250,000 shares of common stock with a
      fair
      value of $.025 per share to settle debt of $6,250 in 2006.





On
      November 20, 2006, the Company issued 1,400,000 shares of common stock with
      a
      fair value of $.025 per share for consulting services; $35,000 is included
      in
      consulting services for 2006.





On
      November 17, 2006, the Company issued 150,000 shares of common stock with a
      fair
      value of $.025 per share for Legal services; $3,750 is included in professional
      fees for 2006.





On
      November 17, 2006, the Company issued 100,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $2,500 is included in
      professional fees for 2006.





On
      November 17, 2006, the Company issued 150,000 shares of common stock with a
      fair
      value of $.025 per share for PR services; $3,750 is included in consulting
      services for 2006.





On
      November 17, 2006, the Company issued 500,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $12,500 is included in
      consulting services for 2006.





On
      November 17, 2006, the Company issued 200,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $5,000 is included in
      consulting services for 2006.





On
      November 17, 2006, the Company issued 800,000 shares of common stock with a
      fair
      value of $.025 per share to settle $20,000 of debt.




F-15




On
      November 17, 2006, the Company issued 500,000 shares of common stock with a
      fair
      value of $.025 per share for PR services; $12,500 is included in consulting
      services for 2006.





On
      November 17, 2006, the Company issued 150,000 shares of common stock with a
      fair
      value of $.025 per share to settle $3,750 of debt.





On
      November 17, 2006, the Company issued 500,000 shares of common stock with a
      fair
      value of $.025 per share for consulting services; $12,500 is included in
      consulting services for 2006.





On
      November 16, 2006, the Company issued 800,000 shares of common stock with a
      fair
      value of $0.25 per share for PR services; $20,000 is included in consulting
      fees
      for 2006.





On
      November 17, 2006, the Company issued 810,000 shares of common stock with a
      fair
      value of $.025 per share to settle $20,250 of debt.




On
      October 19, 2006, the Company issued 50,000 shares of common stock with a fair
      value of $.035 per share to settle $4,000 of debt.





On
      October 18, 2006, the Company issued 3,250,000 shares of common stock in
      consideration for consulting services.





On
      October 12, 2006 the Company granted warrants to acquire 11,650,000 shares
      of
      common stock in consideration for consulting and management
      services.





On
      October 4, 2006, the Company issued 200,000 common shares with a fair value
      of
      $0.03 per share to settle $6,000 of services provided.





On
      September 27, 2006, the Company issued 200,000 common shares with a fair value
      of $0.03 per share for a loss on shares issued for lease payments.





On
      September 27, 2006, the Company issued 400,000 common shares with a fair value
      of $0.03 per share for auto expenses, of which $1,200 is included in prepaid
      expenses.





On
      September 27, 2006, the Company issued 125,000 common shares with a fair value
      of $0.045 per share for $5,625 of consulting services included in deferred
      compensation.




On
      September 27, 2006, the Company issued 4,525,000 common shares with a fair
      value
      of $0.04 per share for $181,000 of consulting services of which $101,204 is
      included in deferred compensation.





On
      September 27, 2006, the Company issued 100,000 common shares with a fair value
      of $0.03 per share for $3,000 of charitable donations.





On
      September 27, 2006, the Company issued 965,000 common shares with a fair value
      of $0.03 per share for $28,950 of consulting services of which $13,221 is
      included in deferred compensation.





On
      June
      16, 2006, the Company issued 250,000 common shares with a fair value of $0.105
      per share for $26,250 of consulting services.





On
      June
      1, 2006, the Company issued 500,000 common shares with a fair value of $0.09
      per
      share for $45,000 of consulting services.





On
      May 4,
      2006, the Company issued 250,000 common shares with a fair value of $0.10 per
      share for $25,000 of legal services.





On
      April
      16, 2006, the Company issued 500,000 common shares with a fair value of $0.10
      per share for $50,000 of management consulting services.





On
      April
      12, 2006, the Company issued 300,000 common shares with a fair value of $0.105
      per share for $31,500 of consulting services.





On
      April
      12, 2006, the Company issued 150,000 common shares with a fair value of $0.105
      per share for $15,750 of management consulting services.





On
      February 21, 2006, the Company issued 300,000 shares with a fair value of $0.12
      per share for $36,000 of consulting services. is included in deferred
      compensation.





On
      February 21, 2006, the Company issued 150,000 shares with a fair value of $0.12
      per share for $18,000 of filing services. At September 30, 2006, $7,685 is
      included in deferred compensation.





On
      February 16, 2006, the Company declared a stock dividend on the basis of one
      new
      share of common stock for every four shares of common stock outstanding, and
      one
      new share of Series A preferred stock for every four shares of Series A
      preferred stock outstanding. The record date was February 28, 2006 and the
      payment date was March 17, 2006.




F-16




On
      February 14, 2006, the Company issued 100,000 common shares with a fair value
      of
      $0.11 per share for $11,000 of consulting services, included in deferred
      compensation.





On
      February 2, 2006, the Company issued 90,000 common shares with a fair value
      of
      $0.25 per share for $22,500 of consulting services included in deferred
      compensation.





On
      January 28, 2006, the Company issued 200,000 common shares with a fair value
      of
      $0.19 per share for $38,000 of consulting services is included as a deferred
      compensation.





On
      January 22, 2006, the Company issued 134,710 common shares with a fair value
      of
      $0.12 per share for $16,165 of consulting services is included in deferred
      compensation.





On
      January 22, 2006, the Company issued 150,000 common shares with a fair value
      of
      $0.12 per share for $18,000 of consulting services is included as a deferred
      compensation.





On
      January 22, 2006, the Company issued 100,000 common shares with a fair value
      of
      $0.12 per share for $12,000 of consulting services included in deferred
      compensation.





On
      January 18, 2006, the Company issued 300,000 common shares with a fair value
      of
      $0.11 per share for $33,000 of consulting services is included in deferred
      compensation.





On
      January 17, 2006, the Company issued 100,000 common shares with a fair value
      of
      $0.12 per share for $12,000 of consulting services is included in deferred
      compensation.





On
      January 17, 2006, the Company issued 150,000 common shares with a fair value
      of
      $0.12 per share for $18,000 of consulting services is included in deferred
      compensation.





**7.**  **OPTIONS
      AND WARRANTS**





Year
      Ended December 31, 2007:




At
      various times during the year ended December 31, 2007 the Company granted
      warrants to various non-employee consultants, to purchase an aggregate of
      45,000,000 shares of the Company’s common stock at an aggregate exercise price
      of $0.20 expiring in an aggregate 5 years from the date of grant for services
      rendered. These warrants were valued at aggregate of $2,876,277 using a
      Black-Scholes model with
      the
      following weighted average assumptions: dividend
      yield of 0%; expected volatility of 301%; risk-free interest rate of 4.85%;
      an
      expected life of 5 years; stock trading price of $0.06 on the dates of grant.
      All of these warrants were vested immediately upon grant, and accordingly were
      expensed immediately for a total expense of $2,876,277.




The
      following table summarized all warrants granted, exercised and expired in the
      years ended December 31, 2006 and 2007:




Shares
                underlying warrants
            
            Weighted
                average Exercise Price
            
            Shares
                underlying Options
            
            Weighted
                average Exercise Price
              OptionsOutstanding
                as of December 31, 2005
            
            
            1,180,000
            
            $
            0.75
            
            
            7,979,175
            
            $
            .15Granted
            
            
            31,650,000
            
            
            0.15
            
            
            6,650,000
            
            
            0.20Exercised
            
            
            -
            
            
            -
            
            
            (300,000
            )
            
            0.20Expired
                or cancelled
            
            
            (1,080,000
            )
            
            0.75
            
            
            (1,600,000
            )
            
            0.15Outstanding
                as of December 31, 2006
            
            
            31,750,000
            
            
            0.15
            
            
            1,180,000
            
            
            0.19Granted
            
            
            45,000,000
            
            
            0.21
            
            
            -
            
            
            -Exercised
            
            
            
            
            
            
            
            
            -
            
            
            -Expired
                or cancelled
            
            
            (2,100,000
            )
            
            0.15
            
            
            (2,377,753
            )
            
            0.19Outstanding
                as of December 31, 2007
            
            
            74,650,000
            
            $
            
            
            
            10,351,422
            
            $
            0.17




F-17




The
      following table summarizes information about stock warrants outstanding as
      of
      December 31, 2007.


Exercise
                  Price
              
              Outstanding
                  at
                December
                  31, 2007
              
              Weighted
                  Average Remaining Life in Years
              
              Exercisable
                Warrants0.10
              
              
              21,000,000
              
              
              3.81
              
              
              21,000,0000.20
              
              
              41,650,000
              
              
              5.78
              
              
              41,650,0000.15
              
              
              6,000,000
              
              
              4.17
              
              
              6,000,0000.30
              
              
              1,000,000
              
              
              1.83
              
              
              1,000,0000.50
              
              
              5,000,000
              
              
              4.84
              
              
              5,000,00074,650,000
              
              
              5.10
              
              
              74,650,000


The
      following table summarizes information about stock options outstanding as of
      December 31, 2007.




Exercise
                Price
            
            Outstanding
              December
                31, 2007
            
            Weighted
                Average Remaining Life in Years
            
            Exercisable
              Options0.10
            
            
            2,500,000
            
            
            1.42
            
            
            2,500,0000.05
            
            
            500,000
            
            
            0.33
            
            
            500,0000.10
            
            
            251,422
            
            
            1.46
            
            
            251,4220.30
            
            
            600,000
            
            
            1.46
            
            
            600,0000.20
            
            
            1,000,000
            
            
            0.09
            
            
            1,000,0000.20
            
            
            1,000,000
            
            
            0.07
            
            
            1,000,0000.20
            
            
            1,000,000
            
            
            1
            
            
            1,000,0000.20
            
            
            2,500,000
            
            
            3
            
            
            2,500,0000.20
            
            
            1,000,000
            
            
            0.09
            
            
            1,000,0000.17
            
            
            10,351,422
            
            
            1.325
            
            
            10,351,422




Year
      Ended December 31, 2006:





Stock
      Options and Grants


On
      June
      12, 2006, the Company increased the number of shares of common stock of the
      Company subject to the Company’s 2005 stock Incentive plan from 3,900,000 to
      9,000,000.





On
      January 22, 2006, the Company granted 1,000,000 stock options to a consultant
      with an exercise price of $0.20 per share subject to immediate vesting.
      Stock-based compensation of $54,850 was recorded as consulting expense and
      $57,031as deferred compensation during the year ended December 31, 2006. The
      fair value of the stock options was estimated by application of the fair value
      method using Black Scholes option pricing model. Assumptions used in this model
      were as follows:





Risk-free
                interest rate
            
            
            4.26
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            272
            %Expected
                option life
            
            
            2
                years




F-18




On
      January 22, 2006, the Company granted 1,000,000 stock options to a consultant
      with an exercise price of $0.20 per share subject to immediate vesting.
      Stock-based compensation of $36,158 was recorded as consulting expense and
      $75,295 as deferred compensation during the year ended December 31, 2006. The
      fair value of the stock options was estimated by application of the fair value
      method using Black Scholes option pricing model. Assumptions used in this model
      were as follows:





Risk-free
                interest rate
            
            
            4.26
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            272
            %Expected
                option life
            
            
            2.92
                years





On
      January 22, 2006, the Company granted 2,500,000 stock options to the President
      of the Company with an exercise price of $0.20 per share subject to immediate
      vesting. Stock-based compensation of $276,191 was recorded as consulting during
      the year ended December 31, 2006. The fair value of the stock options was
      estimated by application of the fair value method using Black Scholes option
      pricing model. Assumptions used in this model were as follows:





Risk-free
                interest rate
            
            
            4.21
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            272
            %Expected
                option life
            
            
            4
                years





On
      January 28, 2006, the Company granted 1,000,000 stock options to a consultant
      with an exercise price of $0.20 per share subject to immediate vesting.
      Stock-based compensation of $83,342 was recorded as consulting expense and
      $95,689 as deferred compensation during the year ended December 31, 2006. The
      fair value of the stock options was estimated by application of the fair value
      method using Black Scholes option pricing model. Assumptions used in this model
      were as follows:





Risk-free
                interest rate
            
            
            4.38
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            270
            %Expected
                option life
            
            
            2
                years




On
      February 1, 2006, the Company granted 1,000,000 stock options to a consultant
      with an exercise price of $0.20 per share subject to immediate vesting.
      Stock-based compensation of $109,453 was recorded as consulting expense and
      $127,178 as deferred compensation during the year ended December 31, 2006.
      The
      fair value of the stock options was estimated by application of the fair value
      method using Black Scholes option pricing model. Assumptions used in this model
      were as follows:





Risk-free
                interest rate
            
            
            4.47
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            269
            %Expected
                option life
            
            
            2
                years





On
      February 7, 2006, the Company granted 150,000 stock options to a consultant
      with
      an exercise price of $0.30 per share subject to immediate vesting. Stock-based
      compensation of $12,959 was recorded as consulting expense and $7,783 as
      deferred compensation during the year ended December 31, 2006. The fair value
      of
      the stock options was estimated by application of the fair value method using
      Black Scholes option pricing model. Assumptions used in this model were as
      follows:





Risk-free
                interest rate
            
            
            4.55
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            266
            %Expected
                option life
            
            
            1
                year




During
      the year ended December 31, 2006, the Company decreased the exercise price
      of
      100,000 stock options granted to a consultant during the year ended December
      31,
      2005, from $1.00 per share to $0.30 per share. Stock-based compensation of
      $1625
      was recorded as consulting expense and $976 as deferred compensation during
      year
      ended December 31, 2006. The fair value of the stock options was estimated
      by
      application of the fair value method using Black Scholes option pricing model.
      Assumptions used in this model were as follows:





Risk-free
                interest rate
            
            
            4.55
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            266
            %Expected
                option life
            
            
            1
                year




F-19




During
      the year ended December 31, 2006, the Company decreased the exercise price
      of
      100,000 stock options granted to a consultant during the year ended December
      31,
      2005, from $1.00 per share to $0.30 per share. Stock-based compensation of
      $1,221 was recorded as consulting expense and $755 as deferred compensation
      during the year ended December 31, 2006. The fair value of the stock options
      was
      estimated by application of the fair value method using Black Scholes option
      pricing model. Assumptions used in this model were as follows:





Risk-free
                interest rate
            
            
            4.59
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            269
            %Expected
                option life
            
            
            1
                year





On
      May 1,
      2006, the Company increased the exercise price of 250,000 stock options granted
      to a consultant from $0.30 to $0.50 per share for 125,000 stock options and
      $1.00 per share for the remaining 125,000 stock options.





2006
      Warrant Grants:





During
      2006, the Company granted 9,650,000 warrants at $0.20 per unit. Each
      warrant entitles the holder to purchase an additional common share for $0.20
      and
      must be exercised within two to five years of the date of
      issuance.





On
      October 12, 2006, the Company issued 10,000,000 shares and granted warrants
      to
      acquire 10,000,000 shares of common stock exercisable at $0.10 per share for
      five years and warrants to acquire 10,000,000 shares of common stock exercisable
      at $0.20 for ten years to settle $300,000 of debt.




On
      November 16, 2006, the Company granted warrants to acquire 2,000,000 shares
      of
      common stock exercisable at $0.20 per share for 5 years as compensation to
      the
      Companies current president.




**8.**
            **RELATED
                PARTY TRANSACTIONS**





The
      Company has entered into the following related party
      transactions:





a)
            Recorded
                management fees to directors and shareholders for the Years ended
                December
                31, 2007 and 2006 was $3,750,00
                and $2,023,884 respectively.  b)
            From time to time the officers and directors of
              the
              Company advance funds to the Company. These funds are unsecured and
              so not
              have a due date of return. The Company accrues interest at 10% per
              annum
              on all these advances. The totals advances as December 31, 2007 and
              2006
              were $102,032 and $111,410, respectively.  c)
            The Company has received advances from its shareholder
              which bears interest at 10% per annum with no specific repayment terms.
              The amounts outstanding were $1,271,931 as December31 2007 which due
              to
              Julianna Lu, the Company’s CEO/Founder/Chairwoman for a total of $973,719,
              and also due to Xiaofei Yu, the Company’s Vice Chairman for****or
              a total of $297,484****as
              December 31 2007.****  d)
            As of December 31, 2006, the $875,822 due to shareholders
              bears interest at 10% per annum, is unsecured and has no specific terms
              of
              repayment.  e)
            Accrued interest expense to directors and shareholders
              for the Years ended December 31, 2007 and 2006 was $102,032 and $111,410,
              respectively.




**9.**
            **COMMITMENTS
                AND EMPLOYMENT
                AGREEMENTS/CONSULTANTS**





·
            On
                August 3 2007, the Company appointed Mr. Chen Moxian as Senior Vice
                President of China Power, Inc., the Company’s wholly owned subsidiary. The
                Company has issued a total of 250,000 common stocks in July 2007.
                Additional compensation will be based on further projects and
                performances basis. As of December 31 2007, the Company has issued
                to Mr.
                Chen an additional 1,500,000 common shares for his services to the
                Company
                and subsidiary.




·
            On
                April 3, 2007, the Company appointedMr. Ron Shon as the chairman of its advisory board. The Company has
                issued
                Mr. Shon a total of 500,000 shares of common stocks and a total of
                6,000,000 common stocks warrants at an exercise price of $0.20 per
                share.
                These warrants expire three years form the date of
                grant.




F-20




·
            Pursuant
                to various management and consulting contracts the Company has committed
                to pay fees and issue common stock as
                follows:





(i)
      a
      monthly management fee of $20,000 to the Company’s Chief Executive Officer
      starting on January 1, 2006 (ii) to pay a 3% royalty on gross sales, upon
      commencement of sales (iii) pay a monthly consulting fee of $7,000 to a
      shareholder and officer ( Xiaofei Yu) of the Company





**10.**
            **ACQUISITIONS**





As
      of
      December 31, 2007 and through March 31, 2008, the Company has entered into
      numerous acquisition agreements, and business cooperation agreements, with
      many
      business entities and governmental entities in the People's Republic of China.
      As of December 31, 2007 and through March 31, 2008, the Company has not
      completed and finalized any of these acquisition and business cooperation
      agreements. The management of the Company believes that they do not have any
      liability with regards to these acquisition and business cooperation agreements
      if they should not be completed and finalized. In addition, to the extent that
      the acquisition and business cooperation agreements require cash for them to
      be
      consummated, or commenced upon, the Company may not have adequate cash and/or
      financing resources, nor might the Company have the ability to obtain adequate
      cash and/or financing resources.




**11.**
            **INCOME
                TAX**


The
        Company is subject to US Federal and State income taxes. As of December 31,
        2007
        the Company has not achieved profitable operations in any year since their
        inception. Accordingly, no income tax provision has been provided for any
        year
        since inception. The Company has a net operating loss (“NOL”) carry forward for
        United States income tax purposes at December 31, 2007 expiring through the
        year
        2027. Management estimates the NOL as of December 31, 2007 to be approximately
        $1,850,000. The Company’s subsidiaries in China are governed by the Income Tax
        Law of the Peoples Republic of China concerning Foreign Investment Enterprises
        and Foreign Enterprises and local income tax laws (the “PRC Income Tax Law”).
        Pursuant to the PRC Income Tax Law, wholly-owned foreign enterprises are
        subject
        to tax at a statutory rate of approximately 33% (30% state income tax plus
        3%
        local income tax). As the Company’s Chinese subsidiaries have not commenced
        operations, the Company has not provided for any PRC income taxes.
 
 Deferred
        income taxes reflect the net tax effects of temporary differences between
        the
        carrying amounts of assets and liabilities for financial reporting purposes
        and
        the amounts used for income tax purposes. The Company has recognized a valuation
        allowance for these deferred tax assets as it is more likely than not that
        realization will not occur. The Company’s fully reserved deferred tax asset as
        of December 31, 2007 is approximately $650,000.




**12.**
            **SUBSEQUENT
                EVENTS**





·
            On
                February 1, 2008, China Holdings, Inc. (the “Company”) entered into a
                Marketing Services Agreement with Wall Street Reporter Inc. (“WSR”)
                pursuant to which WSR will provide the Company with various investor
                relations and marketing services, such as conferences, interviews
                and
                press releases, for a term of one year.  In exchange for these
                services, the Company has agreed to pay WSR a fee comprised of $9,500
                cash
                and four million (4,000,000) restricted shares of the Company’s common
                stock.





·
            In
                February 2008, the Company has appointed Ms. ZhiFang Lu as Projects
                Manager for the Company and the company’s wholly owned subsidiary: China
                Power, Inc. The Company has issued to Ms. Lu a total of 250,000 shares
                of
                common stock in February 2008 for these services, and the Company
                has
                agreed to pay for her future services on a stocks compensations
                basis.





·
            In
                January 2008, the Company has appointed Mr. Benjamin Chen as Projects
                Manager for the Company and the Company’s wholly owned subsidiary: China
                Power, Inc. The Company agreed to pay for 7000 RMB as monthly salary.
                The
                Company has issued to Mr. Chen a total of 250,000 shares of  common
                stock.





F-21