UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




Form
10-K





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





FOR THE
FISCAL YEAR ENDED DECEMBER 31,
2008





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
                
                98-0432681(State
      or other jurisdiction of incorporation or organization)
                
                (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: 86-10-6280-9561





Mailing
Address


Suite #601 – 110
Dai-Hou-Bei-Li, Hai-Dian-District, Beijing, PR China 100091


Issuer’s
telephone Number: 86-10-6280-9561





China
Health Holding, Inc.


(Former
name, former address and former fiscal year,


if
changed since last report)




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-K or any
amendment to this Form 10-K. 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 30, 2009, was
approximately $1,000,000.




As
of  December31, 2008, China Holdings, Inc. had a
total  333,673,669 fully diluted common stocks/options/warrants
outstanding, which combined with a total of 186,600,000 outstanding shares of
Common Stock , and 1,250,000 shares of Series “A” Preferred Stock, and
77,173,669 outstanding and issued of Common Stock Option, and 69,900,000
outstanding and issued of Common Stock Warrants. approximately 30,000,000 shares
in the public float.




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







TABLE
OF CONTENTS





PagePART
      IItem
      1. Description of Business
                  
                  
                  4Item
      2. Description of Property
                  
                  
                  30Item
      3. Legal Proceedings
                  
                  
                  30Item
      4. Submission of Matters to a Vote of Security Holders
                  
                  
                  30PART
      IIItem
      5. Market for Common Equity and Related Stockholder
Matters
                  
                  
                  30Item
      6. Management’s Discussion and Analysis or Plan of
    Operation
                  
                  
                  38Item
      7. Financial Statements
                  
                  
                  63Item
      8. Changes In and Disagreements with Accountants on Accounting and
      Financial Disclosure
                  
                  
                  63Item
      8A. Controls and Procedures
                  
                  
                  65Item
      8B. Other Information
                  
                  
                  66PART
      IIIItem
      9. Directors, Executive Officers, Promoters and Control Persons;
      Compliance With Section 16(a) of the Exchange Act
                  
                  
                  67Item
      10. Executive Compensation
                  
                  
                  69Item
      11. Security Ownership of Certain Beneficial Owners and
      Management
                  
                  
                  71Item
      12. Certain Relationship and Related Transactions
                  
                  
                  72Item
      13. Exhibits
                  
                  
                  73Item
      14. Principal Accountant Fees and Services
                  
                  
                  79SIGNATURES
                  
                  
                  80




3





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.




PART
I





Item
1.  Description of Business





China
Holdings Inc. (the "Company"),  founded by our Chairwoman and Chief
Executive Officer, Julianna Lu,  was incorporated in the state of
Nevada in the United States of America on April 3, 2002 as AE&E
Pharma Corporation. The Company changed its name on May 25, 2004, to China
Health Holding, Inc. On April 18, 2005, our common stock was approved for
quotation on the OTC Bulletin Board under the symbol "CHHH."  On May 1,
2007, the Company changed its name to China Holdings, Inc. The Company's common
stock trades on the US over-the-counter bulletin board under the
symbol "CHHL”. The Company's new CUSIP number is 16942B 102. The Company's web
site is www.chinaholding.net.





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


4





China
Holdings, Inc. is a development-stage diversified global assets holding company
headquartered in the U.S.  The Company and its subsidiaries are
engaging in multiple China-focused business activities including, land &
real estate development, energy, renewable energy, resources, utilities, and
pharmaceutical ventures. In 2009, China Holdings is focusing on developing
a total of 800 Square Kilometers of Land for Real Estate Development in Inner
Mongolia PR China , which including commercial buildings, and residential
development, five star hotels, shopping centers, casinos, golf courses as well
as horse racing facilities and recreation and entertainment facilities, a new
city will have a cosmopolitan flavors combining architecture from many of the
world’s great cities including Las Vegas, Paris, London, Rome, Venice,
Vancouver, Tokyo, New York, and a new city with a planned initial population of
one million people in 2009-2016 in Inner Mongolia PR China.





The
Company’s wholly-owned subsidiary: China Power, inc. is developing &
construction of a total 2000 MW Wind Power Plants/Projects on a total of 400
Square KM (“Kilometers”) Land now in Inner Mongolia, PR China 2008 -2012. China
Power, Inc. is also developing & construction of a total 250 MW Biomass
Waste to Energy Plants/Projects (5) on a total of 580,000 Mu  Lands
across China  in 2008 -2012. China Power, inc. is developing its
renewable energy power plants in wind energy power plants, biomass clean energy
& hydropower plants to reach a total potential power capacity of
approximately 850 MW to 3200 MW in 2013 approximately.





China
Holdings ’s 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. The Company has had nominal revenues since its
inception.




China Holdings,
Inc.


www.chinaholding.net





China
Holdings, Inc. is a development stage global assets holdings company
headquartered in the U.S.  The Company and its subsidiaries engage in
multiple China-focused business activities including land & real estate
development, and clean energy, energy, resources, and utilities. China Holdings
is developing a total of 800 Square Kilometers of Land for Real Estate
Development in Inner Mongolia PR China, which including commercial buildings,
and residential development, five star hotels, shopping centers, casinos, golf
courses as well as horse racing facilities and recreation and entertainment
facilities, a new city will have a cosmopolitan flavour combining architecture
from many of the world’s great cities including Las Vegas, Paris, London, Rome,
Venice, Vancouver, Tokyo, New York, and a new city with a planned initial
population of one million people in 2009-2016 in Inner Mongolia PR China. The
Company’s objective is to achieve long-term capital appreciation through
investment in companies and other entities with significant assets, investments,
production activities, or other business interests in China or worldwide, and/or
which derive a significant part of their revenue from China or
worldwide.





The
Company has three wholly-owned subsidiaries: (i) China Power, Inc.; (ii) China
Minerals Holdings, Inc.; (iii) China Health Holdings, Inc. For the Company's
profile, please feel free to visit the websites:
http://www.chinaholding.net.





Subsidiaries





China
Holdings, Inc. has  three wholly-owned subsidiaries:


(i)
            China
      Power, Inc.


(ii)
            China
      Minerals Holdings Inc. and


(iii)
            China
      Health Holdings, Inc.





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.





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.


5




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 its 3rd subsidiary, China
Minerals Holdings, Inc. under Nevada State Laws.




Subsidiaries  &
Operations





China Power,
Inc.


www.chinapower.us





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 developing 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, inc. is developing & construction of a total 2000 MW Wind Power
Plants/Projects on a total of 400 Square KM (“Kilometers”) Land now in Inner
Mongolia, PR China 2008 -2012. China Power, Inc. is also developing &
construction of a total 250 MW Biomass Waste to Energy Plants/Projects (5) on a
total of 580,000 Mu  Lands across China  in 2008 -2012.
China Power, inc. is developing its renewable energy power plants in wind energy
power plants, biomass clean energy & hydropower plants to reach a total
potential power capacity of approximately 850 MW to 3200 MW in 2013
approximately.





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.


www.chinahealthholding.com





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 2009-2013 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.


6




Recent
Development





China Holdings,
Inc.


800 Square Kilometers of
Land for Real Estate Development


In Inner Mongolia, PR
China





China
Holdings, Inc. (the “Company”) has legally secured a Land Acquisition &
Development, Land Right & Ownership Contract ("the Contract") with local
municipal government, Inner Mongolia, P.R. China to exclusively acquire and
develop a total of  800 Million Square Meters of  Lands
(Residential, Commercial, Industrial and Recreation Lands) at the fixed prices
of : 1) 100 Million Square Meters (City Centre) Lands at 58,000 Yuan (China
Currency) per mu (1 Mu = 667 Square Meters), and 2). Additional 700 Million
Square Meters at 100,000 Yuan per mu. The Contract allows the Company to acquire
all or part of the 800 Million Square Meters of Lands (Residential, Commercial,
Industrial and Recreation Lands) in the next seven (7) years exclusively with
non-competition & non-solicit legal protection for the local inner Mongolia
government.





The Value
inherent in the Company's unique position of The Land Acquisition &
Development, Land Right & Ownership for the 800 Million Square Meters Lands
of  Residential, Commercial, Industrial and Recreation Lands in Inner
Mongolia PR China are truly extraordinary with multi-billions dollars
values,  and the progress the Company has made on its initiatives for
the coming years signals the ability to capitalize on the underlying potential
/profits of land /real estate/properties development in Inner Mongolia,
China.





China
Holdings is developing the Phase I: 100 Square Kilometers of Land Development -
The Master Plan : The Land and City Planning now. The Company’s ultimate master
plan will consist of 100 Square Kilometers of land in Inner Mongolia, PR China.
The Company’s objective is to maximize the value of every square meter of land
to China Holdings, Inc. and its shareholders’ ultimate benefit. The master plan
will be not only exciting but a presentation package that will assist China
Holdings’ further worldwide marketing efforts to develop and partially sell 100
Square KM land parcels in multi-billion dollars as ultimate values.





China Power
Inc.


Building 2250 MW Renewable
Energy Assets in China 2009-2013


400 Square Kilometers Land
for 2000 Megawatts Wind Power Plants





China
Holdings, Inc. and its’ controlled subsidiary: China Power, Inc. ( together ( “
the Company”) have executed A Land Acquisition, Land Right & Ownership
Agreement (“ the Agreement”) with local municipal government in Inner Mongolia,
P.R. China to exclusively acquire a total of 400 Square KM of Industrial lands
at a fixed price of 58,000 Yuan ( China Currency) Per Mu Lands ( 1 Mu = 667
Square Meters) with non-competition & non-solicit protections from the local
government. The Agreement allows the Company to acquire all or part of
the 400 Square KM of Industrial lands in next four years exclusively. The
Agreement also allows the Company to apply for partial Lands RE-ZONING into Residential Lands or/and Commercial
Lands for further Lands Development. China Holdings, Inc. (the
“Company”)’s controlled subsidiary: China Power, Inc. focuses on its developing
and construction of 2000 Megawatts Wind Power Plants/Projects on this 400 Square
Kilometers lands in Inner Mongolia, PR China in 2009 – 2013.





(notes:
The Company has not recorded the tangible assets of  12,000 Sq KM
lands/assets & the proprietary rights as fair-valued tangible assets as the
year ending as December 31 2008 yet, but will record the  tangible
assets of  12,000 Square KM lands/assets & the proprietary rights
as fair-valued tangible assets after further Valuation for the Company’s 12,000
Square KM lands/assets/& the proprietary rights as fair-valued tangible
assets  in the Company’s 2nd Quarter
ending in 2009 Financial Statement/SEC Form 10Q in August,
2009).


7




China Power
Inc.


2000 Megawatts Wind Power
Plants/Projects




China Holdings, Inc., via its
controlled subsidiary China
Power, Inc.has secured exclusive contracts with local government in
Inner Mongolia China to exclusively develop and construct Two (2) Wind Power Plants to generate
2,000 MW (“Megawatts”)
of electricity on a total 400
Square KM land with non-competition & non-solicit protections from
the local government. China
Power Inc. expects to break ground in 2009 for the initial 300 MW of wind
power, to be completed within 24 months approximately.  Under the
China Renewable Energy Laws and Registrations, the China State Power Grid has
guaranteed to purchase 100% of the power generated by China Power, Inc.’s Wind Power Plants
(2,000 MW) at 0.55 Yuan per kilowatt hour or approximately $0.08 per
kilowatt hour, with a 4% increase annually for 25 years with additional
guaranteed extension terms.





The
Company's 2000 Megawatts Wind Farm Power Plants are legally financially
protected by Local Chinese Government & China New Renewable Energy Policies
& Laws to wind energy producers and developers. Under the China Renewable
Energy Laws and Registrations, the China State Power Grid has agreed to purchase
100% of the power generated by the company’s wind power plants (2,000 MW) at
0.55 Yuan per kilowatt hour or approximately $0.08 per kilowatt hour, with a 4%
increase annually for 25-30 years with additional guaranteed extension terms..
The Company expects total gross revenue of 2,750 Million Yuan (2,000,000
Kilowatts x 2500 Hours x 0.55 Yuan/Kwh) in 4 -5 years upon 2,000 MW Wind Farm
Power Plants in full production. The value inherent in the Company's unique
position through its 2000 MW Wind Power Plants/Projects is truly extraordinary,
and the progress the Company has made on its initiatives for the coming years
signals the ability to capitalize on the underlying potential of renewable
energy power plants & industry in China, or/and worldwide.





China Power
Inc.


250 Biomass Waste to Energy
Power Plants/Projects





China Holdings, Inc.,via its
controlled owned subsidiary China Power, Inc.  has
entered a total of  five (5) development, investment and construction
agreements with the local China Government in Hebei, Hunan, AnHui and Inner
Mongolia Provinces, PR China 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 foregoing, according to the China Central Government’s current
alternative energy laws related to Biomass Energy Projects, under the All
Construction Agreements, guaranteed (i) the financing for up to 65% of the 580
million Yuan China Power has committed to the development of all the power
plants through local banks at a preferred interest rate, (ii) that 100% of the
power generated by the Biomass Energy plants shall be purchased by the China
State Grid at a purchase price of between 0.60 and 0.65 Yuan, or approximately
$0.09 and $0.08, per kilowatt, (iii) All Biomass Energy Power Generation
Plant/project (50MW) has designated with a total potential of 400 million KW/hr
power generation capacity approximately annually, (iv) China Power’s rights
under the Construction Agreements are all exclusive. The construction of the
plant is estimated to take approximately two to three years.





China
Power is going to consolidate/develop its construction
plan/execution  on its five 50 MW biomass power plants, for a total of
250 MW in Hebei, Hunan, AnHui and Inner Mongolia Provinces, PR China in
2009-2013. China Power has completed two (2) Biomass Plants/projects’feasibility
studies in 2008 via: China Electric & Design Institute, owned/controlled by
China National Mechanical & Industrial Minister ( “CEI”)
(China-National-Top-Rank (6) Engineering Firm). However, due to current world
economy crisis, China Power & CEI expect to reduce 20%-30% total
construction cost from 600 millions RMB down to 400 millions RMB for each 50 MW
biomass plants/projects. China Power have also completed three (3) fuel analysis
completed for three biomass plants/projects. China Power expects to break ground
on the biomass projects in 2009, with completion in 24 to 36 months. Under China
Renewable Energy Laws and Registrations, the China State Power Grid has agreed
to purchase 100% of the electricity power generated by the company’s five
biomass power plants at 0.60 Yuan per kilowatt hour or approximately $0.088 per
kilowatt hour, with a 4% annual increase for 25 years, and additional guaranteed
extension terms. China Power expects to reach a total of gross revenue: 900
millions RMB = 5 x 50,000 KW x 6000 Hours x 0.60 Yuan in 4 -5 years upon 250 MW
-5 Biomass  Power Plants in full production. The net income is
estimated as 45% of the total gross revenue.


8




China Holdings,
Inc.


800 Square Kilometers of
Land for Real Estate Development/Contracts


In Inner Mongolia, PR
China





On
February 28, 2009,  China Holdings, Inc. (the “Company”) has legally
executed a Land Acquisition & Development, Land Right & Ownership
Contract ("the Contract") with local municipal government, Inner Mongolia, P.R.
China to exclusively acquire and develop a total of  800 Million
Square Meters of  Lands (Residential, Commercial, Industrial and
Recreation Lands) at the fixed prices of : 1) 100 Million Square Meters (City
Centre) Lands at 58,000 Yuan (China Currency) per mu (1 Mu = 667 Square Meters),
and 2). Additional 700 Million Square Meters at 100,000 Yuan per mu. The
Contract allows the Company to acquire all or part of the 800 Million Square
Meters of Lands (Residential, Commercial, Industrial and Recreation Lands) in
the next seven (7) years exclusively with non-competition & non-solicit
legal protection for the local inner Mongolia government.





The Value
inherent in the Company's unique position of The Land Acquisition &
Development, Land Right & Ownership for the 800 Million Square Meters Lands
of  Residential, Commercial, Industrial and Recreation Lands in Inner
Mongolia PR China are truly extraordinary with multi-billions dollars
values,  and the progress the Company has made on its initiatives for
the coming years signals the ability to capitalize on the underlying potential
/profits of land /real estate/properties development in Inner Mongolia,
China.





On March
12, 2009, China Holdings, Inc. (the “Company”)’s BOARD has
approved  the Company’s  Phase I : 100 Square Kilometers of
Land Development - The Master Plan : The Land and City Planning –Development
Schedules.





China Holdings,
Inc.


800 Square Kilometers of
Land for Real Estate Development in Inner Mongolia, PR China


Building China Las Vegas
:  A New City in Inner Mongolia, PR China


Phase I : 100 Square
Kilometers of Land Development


The Master Plan : The Land
and City Planning





The
ultimate master plan will consist of 100 Square Kilometers of land in Inner
Mongolia, PR China. The Company’s objective is to maximize the value of every
square meter of land to China Holdings, Inc. and its shareholders’ ultimate
benefit. The master plan will be not only exciting but a presentation package
that will assist China Holdings’ further worldwide marketing efforts to develop
and partially sell 100 Square KM land parcels in multi-billion dollars as
ultimate values.





The Phase
IA master plan is consist of 20 Square Kilometers of land in Inner Mongolia, PR
China.





China Holdings,
Inc.


800 Square Kilometers of
Land for Real Estate Development in Inner Mongolia, PR China


Phase I:  100
Square Kilometers of Land / Real Estate Development


The Master Plan : The Land
and City Planning





On March
18, 2009, China Holdings, Inc. (the “Company”) has approved the Company’s
further development of


An
Initial Public Offering ( “ IPO”) US$200 - $400 million  of “China
Holdings, Inc.” in 2010 – 2011 upgrades to :


i.
            NASDAQ
      Small Cap Market or New York Stock Exchange,
USA


ii.
            Toronto
      Stock Exchange (TSX or TSX –V),
Canada


iii.
            AIM
      in London Stock Exchange, England





China
Holdings, Inc. focuses on 800 Square Kilometers of Land for Real Estate
Development in Inner Mongolia, PR China in 2009 – 2016. The multi-billion dollar
value inherent in the China Holdings, Inc. unique position of The Land
Acquisition & Development, Land Right & Ownership for the 800 Square KM
(“Kilometres”) Lands of Residential, Commercial, Industrial and Recreation Lands
in Inner Mongolia PR China are truly extraordinary with multi-billions dollars
values,  and the progress the Company has made on its initiatives for
the coming years signals the ability to capitalize on the underlying potential
multi-billions dollars assets & profits of land /real estate/properties
development in Inner Mongolia, China.


9




China
Holdings, Inc.’s Ultimate Master Plan – Phase I - will consist of 100 Square
Kilometers of land in Inner Mongolia, PR China. The Company’s objective is
maximizing the value of every square meter of land to China Holdings &
shareholders’ ultimate benefit/value, and the New City in Inner Mongolia PR
China. The master plan will be not only exciting but a presentation package that
will assist China Holdings’ further worldwide selling partial of 100 Square KM
land parcels to the top international developers at ultimate values: with
multi-billion dollars assets & revenues. The New City which China Holdings,
Inc. is developing now in Inner Mongolia PR China will generate multi-billion
dollars revenues & assets annually in 1- 20 years like US Las Vegas City in
2006 – 2007, and will provide as A New World-Class City/Window in China to the
World.





On March
18, 2009, China Holdings, Inc. (the “Company”) has  approved the
Company’s further development of US$1,000,000 private placement offering,
pursuant to Regulation S promulgated under the Securities Act of 1933, and
pursuant to  Rule 501(a) of Regulation D under the Securities Act of
1933,as amended (the “Securities Act”) and WHEREAS, pursuant to Section 4(2) of
the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506
promulgated thereunder, the Company is offering up to 20,000,000 shares of the
Company’s common stock (SEC 144 rules/legends) and warrants (SEC 144
rules/legends)to purchase 20,000,000 shares of the Company’s common stock in a
private placement (the “Offering”) on the terms and conditions set forth herein:
for eachshare of
the Company’s common stock, $.001 par value (“Shares”), at a premium purchase
price of USD $0.05 per share (the “Common Stock”), and  includes One
(1) warrant (the “Warrant”) to purchase per share of Common Stock: the warrant
is exercisable for a period of  (12) months, at a price $US0.20 per
share. Upon further completion, the Company will file with SEC FORM 8-K for
further legal disclosure and proper sec rules compliances.





The Use
of Proceeds of US$1,000,000 is for the Company’s Master Plan of Land /City
Planning: Phase IA Land Development:  The City Center: 20 Square KM
land of 100 Square Kilometer Land in Inner Mongolia, PR China. China Holdings,
Inc. is planning to fully complete The Master Plan of Land /City Planning: Phase
IA:  The City Center: 20 Square KM land of  100 Square
Kilometer Land in Inner Mongolia, PR Chin in four (4) months in August –
September 2009 approximately. China Holdings, Inc.’sMaster Plan : The Land
and City Planning - The Phase IA master plan is consist of 20 Square Kilometers
of land in Inner Mongolia, PR China: which provide with all the urban planning
& designs for all the streets & buildings ( commercial, residential,
industrial, & recreations) in initial 20 Sq. KM land – China Holdings, Inc.
‘s  objective is maximize the value of every square meter
of  20 – 100 Sq KM land as the ultimate value as multi-billion dollars
assets/revenues.





Phase I : 100 Square
Kilometers of Land Development


The Master Plan : The Land
and City Planning


The Development
Schedules





China
Holdings’ ultimate master plan will consist of 100 Square Kilometers of land in
Inner Mongolia, PR China. The Company’s objective is to maximize the value of
every square meter of land to China Holdings, Inc. & its shareholders’
ultimate benefit. The master plan will be not only exciting but a presentation
package that will assist China Holdings’ further worldwide marketing efforts to
develop and partially sell 100 Square KM land parcels as ultimate values in
multi-billion dollars revenue and in multi-billion dollars assets.





The
Phase I :  100 Square Kilometers of Land Development - The Master Plan
: The Land and City Planning - The Phase IA master plan is consist of 20 Square
Kilometers of land in Inner Mongolia, PR China: which provide with all the urban
planning & designs for all the streets & buildings ( commercial,
residential, industrial, & recreations) in initial 20 Sq. KM land – China
Holdings, Inc. ‘s  objective is maximize the value of every square
meter of  20 – 100 Sq KM land as the ultimate value as multi-billion
dollars assets/revenues.





The
Development Schedules  – Four (4-5) Months in Aug-Oct. 2009
Completion





Month
I  (May – June 2009): Evaluation Phase


Deliverables
include:


10




l
            Site
      and context analysis


l
            Program
      generation


l
            Team
      mobilization


l
            Understanding
      of historic precedents


l
            Review
      of natural and man made
morphologies


l
            Concept
      story telling


l
            Orchestration
      of presentation materials


l
            Site
      visit and technical workshop





Month II
(June – July 2009): Analysis Phase


Deliverables
include:





l
            Generation
      of alternative solutions as
appropriate


l
            Movement
      system analysis


l
            Open
      space systems analysis


l
            Density
      calculations


l
            Selection
      of preferred mater planning concept





Month
III  (July - August 2009): Synthesis Phase


Deliverables
include:





l
            Refinement
      of preferred master plan


l
            Development
      of zoning diagram


l
            Alternative
      site massing diagrams


l
            Development
      of character studies


l
            Development
      of phasing diagram





Month IV
( August - September – October 2009): Communication Phase


Deliverables
include:





l
            Provision
      of colored master plan


l
            Provision
      of up to 12 -20 character sketches


l
            Provision
      of 3 -10 cross sections


l
            Provision
      of colored master plan – Stand  Physical Massing Models : Land
      Scales: (1:1000 Scale) or (1:500
Scale)


l
            Provision
      of colored master plan –  3D massing models: Land Scales:
      (1:1000 Scale) or (1:500 Scale): for 30-60 sec. fly-through animations
      or/and 360 degree spin around
animations


l
            Provision
      of colored master plan –Power Point Presentations & Marketing
      materials: Overall Projects Concept





China Holdings, Inc. – 800
Square Kilometers of Land for Real Estate Development


Iin Inner Mongolia PR
China


Phase II :  100
Square Kilometers of Land Development


The Master Plan Completion
& China/Worldwide Lands Parcels Marketing & Land
Development





l
            Worldwide
      - 100 Square Kilometers of Land Parcels: Partial 100 Sq KM Land
      Parcels  - China/Worldwide Marketing: Multi-Billon Dollars
      Revenues and Multi-Billon Dollars
Assets


l
            100
      Square Kilometers Land - Construction & Land Development  -
      Real Estate Development: Commercial,
      buildings/properties,  Residential buildings/properties,
      Industrial buildings/properties & recreation buildings/properties :
      Multi-Billon Dollars Revenues and Multi-Billon Dollars
    Assets




11


Julianna
Lu/The Chairwoman/CEO of China Holdings, Inc. plans to develop the Phase I: 100
Square Kilometers parcel of land in Inner Mongolia into a new city with a
planned initial population of one million people in 2009-2016. The first phase
will involve creation of a visionary plan for the new city including commercial
buildings, and residential development,  five star hotels, shopping
centers, casinos, golf courses as well as horse racing facilities and recreation
and entertainment facilities.  Julianna Lu/ The Chairwoman /CEO
of  China Holdings, Inc. is intended that the new city will have a
cosmopolitan flavour combining architecture from many of the world’s great
cities including Las Vegas, Paris, London, Rome, Venice, Vancouver, Tokyo, New
York and Hong Kong, etc. The land/city development is located near an existing
brand-new airport, and served by advanced high speed railway and modern
highway.  All of the required basic infrastructure has already been
built by the Chinese Government in later 2008. China Holdings will
develop/construct partial lands parcels into commercial, residential/industrial
buildings, and partial development parcels will be sold to major worldwide
developers & China Holdings will strictly controlled the land development
process & all the government &legal processing according to China Land
Law & Regulation so that an efficient, modern attractive world-class city
will be create. The 800 Sq KM land for development is located within 5
kilometers of a city centre and will be developed with a master plan according
to international standards and developed in consultation with the government and
international top-developers. The Company will capture and capitalize the
potential significant commercial, industrial, residential and recreational
properties development opportunities. China Holdings expects to generate
significant multi-billion valued assets, gross revenues in multi-millions or
billions from its development for the Phase I: 100 square kilometers of land
/real estate development in late 2009 or early 2010.





China
Holdings, Inc. is going to develop the 800 Square Kilometers land in Three (3)
Phases in next 1-10 years, includes with Phase I: 100 Square Kilometers
including with Phase IA (20 Square KM), Phase IB (30 Square KM), and Phase IC
(50 Square KM), and Phase II for 200 Square Kilometers, and Phase III for 500
Square Kilometers.





The
multi-billion dollar value inherent in the China Holdings, Inc. unique position
of The Land Acquisition & Development, Land Right & Ownership for the
800 Square KM (“Kilometres”) Lands of Residential, Commercial, Industrial and
Recreation Lands in Inner Mongolia PR China are truly extraordinary with
multi-billions dollars values,  and the progress the Company has made
on its initiatives for the coming years signals the ability to capitalize on the
underlying potential multi-billions dollars assets & profits of land /real
estate/properties development in Inner Mongolia, China.





The
Company is developing its new version website: www.chinaholding.net
with all the updated land development and new version of www.chinaholding.net
will be opening to public in 2-3 months.





(Notes:
The Company has not recorded the tangible assets of the total 800 Sq KM
lands/assets & the proprietary rights as fair-valued tangible assets yet as
the year ending as December 31 2008, but will record the 800 Square KM
lands/assets & the proprietary rights as fair-valued tangible assets after
further Valuation for the Company’s 800 Square KM lands/assets/& the
proprietary rights as fair-valued tangible assets  in the Company’s
2nd
Quarter ending in 2009 Financial Statement/SEC Form 10Q in August,
2009).




China Power
Inc.


Building Renewable Energy
Assets in China


2000 Megawatts Wind Power
Plants/Projects – Development


400 Square Kilometers
Land





400 Square Kilometers Land
for 2000 Megawatts Wind Power
Plants/Projects  Development





As
confirmed on November 26, 2008,
China Holdings, Inc. and its’ controlled subsidiary: China Power, Inc. ( together (
“ the Company”) has already executed A Land Acquisition, Land Right &
Ownership Agreement (“ the Agreement”) with local municipal government in Inner
Mongolia, P.R. China to exclusively acquire a total of 400 Square KM of Industrial
lands at a fixed price of 58,000 Yuan ( China Currency) Per Mu Lands ( 1 Mu =
667 Square Meters) with non-competition & non-solicit protections from the
local government. The Agreement allows the Company to acquire all or part of the
of  400 Square
KM of Industrial lands in next four years exclusively. The Agreement also
allows the Company to apply for partial Lands
RE-ZONING into Residential Lands
or/and Commercial Lands for further Lands Development.




12


As
confirmed in September,
2008, China Holdings, Inc. and its controlled subsidiary, China Power Inc. have secured
exclusive rights/agreements with local government in Inner Mongolia China to
exclusively develop and construct Wind Power Plants to generate
2,000 MW (“Megawatts”)
of electricity on a total 400
Square KM land with non-competition & non-solicit protections from
the local government. China
Power Inc. expects to break ground in 2009 for the initial 300 MW of wind
power, to be completed within 24 months approximately.  Under the
China Renewable Energy Laws and Registrations, the China State Power Grid has
guaranteed to purchase 100% of the power generated by China Power, Inc.’s Wind Power Plants
(2,000 MW) at 0.55 Yuan per kilowatt hour or approximately $0.08 per
kilowatt hour, with a 4% increase annually for 25 years with additional
guaranteed extension terms.





China Holdings, Inc. and its’
controlled subsidiary: China
Power, Inc.  have  increased the commitment to
develop and maximize all the stockholders’ value on a long-terms
basis.





Building Renewable Energy
Assets in China


China Power,
Inc.


2000 Megawatts Wind Power
Plants/Projects Development on 400 Square Kilometers Land





On
March 18, 2009, China Holdings, Inc. (the “Company”) has approved the Company’s
further development plan of An Initial Public Offering ( “ IPO”) US$200 - $400
million of “China Power, Inc.” in 2010-2011 to list “China Power, Inc.” onto
Toronto Stock Exchange or TSX –V enture in Canada or/and NASDAQ Small Cap
Market.





On March
18, 2009, China Holdings, Inc. (the “Company”) has also approved the Company’s
controlled subsidiary: China Power, Inc.’s further development of US$3,000,000
private placement offering, pursuant to Regulation S promulgated under the
Securities Act of 1933, and pursuant to  Rule 501(a) of Regulation D
under the Securities Act of 1933,as amended (the “Securities Act”) and WHEREAS,
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company is offering
up to 6,000,000 shares of the Company’s common stock (SEC 144 rules/legends) and
warrants (SEC 144 rules/legends)to purchase 6,000,000 shares of the Company’s
common stock in a private placement (the “Offering”) on the terms and conditions
set forth herein: for eachshare of the Company’s
common stock, $.001 par value (“Shares”), at a premium purchase price of USD
$0.50 per share (the “Common Stock”), and  includes One (1) warrant
(the “Warrant”) to purchase per share of Common Stock: the warrant is
exercisable for a period of  (12) months, at a price $US1.00 per
share. Upon further completion, the Company/China Power, Inc. will file with SEC
FORM 8-K further legal disclosure and proper sec rules compliances.





The Use
of Proceeds of US$3,000,000 are for the completion of  China Power,
Inc.’s 2000 MW Wind Power Plants - Phase I - Wind Resources Monitoring Programs
-300 MW Wind Power Plants" in 2009 for 6-12 months programs on 300 MW Wind Power
Plants as Phase I Development/Plan. The company expects to break ground in
2009-2010 for the initial 300 MW of wind power, to be completed in 2-3
years.





The value
inherent in China Power's unique position through its 2000 MW Wind Power
Plants/Projects is truly extraordinary, and the progress the China Power has
made on its initiatives for the coming years signals the ability to capitalize
on the underlying potential of renewable energy power plants & industry in
China, or/and worldwide.





On March
18, 2009, China Holdings, Inc. (the “Company”) has approved the Company’s
further development plan of An Initial Public Offering ( “ IPO”) US$200 - $400
million of “China Power, Inc.” in 2010-2011 to list “China Power, Inc.” onto
Toronto Stock Exchange or TSX –V enture in Canada or/and NASDAQ Small Cap
Market.





China Power,
Inc.


2000 Megawatts Wind Power
Plants/Projects Development on 400 Square Kilometers
Land  (2009-2013)


Phase I – 300 Megawatts Wind
Power Plants/Projects: Wind Resources Monitoring Programs (12 months
2009-2010)


Phase II - 300 Megawatts
Wind Power Plants Development/Construction (2010-2013)





China
Holdings, Inc. (the “Company”)’s controlled subsidiary: China Power, Inc.
focuses on its developing and construction of 2000 Megawatts Wind Power
Plants/Projects on 400 Square Kilometers lands in Inner Mongolia, PR China in
2009 – 2013.


13





China
Power, Inc. has moved forward for THE 2000 MW WIND POWER
PLANTS/PROJECTS DEVELOPMENT/CONSTRUCTIONS PLAN (2009-2013)in Inner
Mongolia PR China with the following programs & plans:





1.
            Conducting
      the "Wind Resources Monitoring Programs" in 2009 for 6-12 months programs
      on 300 MW Wind Power Plants as Phase I Development/Plan. The company
      expects to break ground in 2009-2010 for the initial 300 MW of wind power,
      to be completed in 2-3 years.





2.
            Execute/Complete
      "Wind Turbines Supplying & Operation System" /Contracts with China Top
      Rank Wind Turbines’ Manufactures or/and Global Industrial Wind Turbines
      Manufactures/", and ensure the system with the
      following  features:





*     Wind
Turbines (700 of 3.0MW or 600 of 3.6 MW): with the aim of reducing the cost per
kWh, and lighter,


Stronger
towers and ground-breaking nacelle design which produces more power from less
weight with efficiency, economic, effectiveness.





*     Wind  Farm
Operation Systems (Advanced) with the features of  Real-time active
and reactive power control of the entire wind power plant; Control and
monitoring of wind turbines, meteorology ,instruments and substations; Plant
performance summaries in both text and graphical form; Comprehensive report
generator module;  Productivity presentations; Availability
calculations; Instant online data from any turbine: Status, power, wind speed,
voltage current, temperatures and alarms; 10-minute averaged data, including
mean values, standard deviations, minimum and maximum values; Advanced power
curve presentations, including power curves, scatter curves, reference and wind
distribution curves from multiple units; User-friendly graphical user interface
based  on Windows standards; Client connection manager for access to
multiple power plants; Secure login with customisable access profiles; Remote
control of a single wind turbine or a group of  turbines.





3.
            Complete
      “EPC Contracts” with China-National Top Rank Engineering Firms or/and
      Top-Global Engineering Firms (“EPC": Project Planning and Design, Project
      management, engineering, procurement and construction expertise) to
      construct the Company’s 2000 Megawatts Wind Power Plants/Projects in Inner
      Mongolia PR China on a turnkey basis/solution, and with upset price
      guarantees and fixed wind turbines installation & construction
      completion timetables.  “EPC” Completion Wind Turbines
      Installations and Manufacturing “2000 MW WIND POWER PLANTS/PROJECTS” on
      400 Square KM Lands in Inner Mongolia PR China in 2-4 years
      approximately.





China
Power, Inc.’s 2000 Megawatts Wind Farm Power Plants are legally financially
protected by Local Chinese Government & China New Renewable Energy Policies
& Laws to wind energy producers and developers. Under the China Renewable
Energy Laws and Registrations, the China State Power Grid has agreed to purchase
100% of the power generated by the company’s wind power plants (2,000 MW) at
0.55 Yuan per kilowatt hour or approximately $0.08 per kilowatt hour, with a 4%
increase annually for 25-30 years with additional guaranteed extension
terms..


China
Power expects total gross revenue of 2,750 Million Yuan (2,000,000 Kilowatts x
2500 Hours x 0.55 Yuan/Kwh) in 4 -5 years upon 2,000 MW Wind Farm Power Plants
in full production.





The value
inherent in China Power's unique position through its 2000 MW Wind Power
Plants/Projects is truly extraordinary, and the progress the China Power has
made on its initiatives for the coming years signals the ability to capitalize
on the underlying potential of renewable energy power plants & industry in
China, or/and worldwide.




14




China
Power, Inc.
 1000
Megawatts - 2nd
Wind Power Plants/Projects/Contract
  On
September 16, 2008, China Power, Inc., China Holdings, Inc.’s controlled
subsidiary (“China
Power”), entered into a 2ndagreement of a Four (4)
Years Development and Construction Agreement (the “Construction
Agreement”) with Ontniute Government (“Ontniute”), Inner Mongolia,
People’s Republic of China, pursuant to which China Power was granted the
exclusive right to develop and construct  THE INNER MONGOLIA 2nd
ONTINUTE WIND ENERGY POWER PLANTS/PROJECTS with power capacity of 298.8 megawatt ( 6 x 49.8
megawatt), and a potential up to 996 megawatt ( 20 x 49.8 MW)
wind energy power capacity . Specifically, under the Construction
Agreement, Ontniute has agreed to provide China Power with:1). Exclusive and
First Refusal Rights with non-competition and non-solicit terms, 2). The land
rights for up to a 2nd of 200
square KM (Kilo meters) of land in a 2nddefined areas , to
develop THE INNER MONGOLIA 2ndONTINUTE WIND ENERGY
POWER PLANTS/PROJECTS with power capacity of 298.8 megawatt ( 6 x 49.8
megawatt), and a potential up to 996 megawatt ( 20 x 49.8MW) wind energy power
capacity . Conversely, China Power has committed to invest up to 2700 million
Yuan ( with 35% in cash equity investment and 65% bank loans) towards the
development and construction of the power plants.




In
addition to the foregoing, according to the China Central Government’s currently
alternative energy laws related to Wind Energy Projects, under the Construction
Agreement, Chinese Government has guaranteed (i) the financing for up to 65% of
the total 2700 million Yuan through a local bank at a preferred interest rate to
China Power committed to the development of the power plants, ii) that 100% of
the electricity power generated by the Wind Energy plants shall be purchased by
the China State Grid at a purchase price of between 0.50 and 0.55 Yuan, per
kilowatt, (iii) THE INNER MONGOLIA 2nd
ONTINUTE WIND ENERGY POWER PLANTS/PROJECTS have the designated 298.8 megawatt ( 6 x 49.8 MW)
wind energy power capacity, and a potential up to 996 megawatt ( 20 x 49.8 MW)
wind energy power capacity (iv) China Power’s rights under the
Construction Agreement are exclusive.




The
Construction Agreement also provides that Ontinute  shall be
responsible for securing all necessary government approvals and ensuring the
supply of all required utilities, such as electricity, water, communications and
roadways, and China Power shall be responsible for obtaining all required
financing for the plants and operating the plants with the most advanced
technology available. The development and construction of the plants are
estimated to take approximately three (3) years.




Additionally,
China Holdings, Inc. and its controlled subsidiary : China Power, Inc. have
doubled the commitments for further development, construction and contributions
to The Clean Energy Power Plants/Industry in China, or/and worldwide , include
Wind Energy, Biomass Clean Energy and Hydropower Plants. The Company will speed
up its substantial corporate financings development, and partnerships with
global private equity funds, and structure investments to optimize returns of
the Company’s global investors, stockholders and investments. The company has
increased its commitment to develop and maximize all the stockholders’ value on
a long-terms basis.





China Power,
Inc.


1000 Megawatts –
1stWind Power
Plants/Projects/Contract





On
September 3, 2008, China Power, Inc., China Holdings, Inc.’s controlled
subsidiary (“China
Power”), entered into a Three (3) Years Development and Construction
Agreement (the “Construction
Agreement”) with Ontniute Government (“Ontniute”), Inner Mongolia,
People’s Republic of China, pursuant to which China Power was granted the
exclusive right to develop and construct  THE INNER MONGOLIA ONTINUTE WIND
ENERGY POWER PLANTS/PROJECTS with power capacity of 298.8 megawatt ( 6 x 49.8
megawatt), and a potential up to 996 megawatt ( 20 x 48.9 MW) wind energy power
capacity . Specifically, under the Construction Agreement, Ontniute has agreed
to provide China Power with :1). Exclusive and First Refusal Rights with
non-competition and non-solicit terms, 2). The land rights for up to 200 square
KM (Kilo meters) of land, to develop THE INNER MONGOLIA ONTINUTE WIND ENERGY
POWER PLANTS/PROJECTS with power capacity of 298.8 megawatt ( 6 x 49.8
megawatt), and a potential up to 996 megawatt ( 20 x 48.9 MW) wind energy power
capacity . Conversely, China Power has committed to invest up to 2700 million
Yuan ( with 35% in cash equity investment and 65% bank loans) towards the
development and construction of the power plants.




In
addition to the foregoing, according to the China Central Government’s currently
alternative energy laws related to Wind Energy Projects, under the Construction
Agreement, Chinese Government has guaranteed (i) the financing for up to 65% of
the total 2700 million Yuan through a local bank at a preferred interest rate to
China Power committed to the development of the power plants, ii) that 100% of
the electricity power generated by the Wind Energy plants shall be purchased by
the China State Grid at a purchase price of between 0.50 and 0.55 Yuan, per
kilowatt, (iii) THE INNER MONGOLIA ONTINUTE WIND ENERGY POWER PLANTS/PROJECTS
have the designated 298.8 megawatt ( 6 x 48.9 MW) wind energy power capacity,
and a potential up to 996 megawatt ( 20 x 48.9 MW) wind energy power capacity
(iv) China Power’s rights under the Construction Agreement are
exclusive.


15




The
Construction Agreement also provides that Ontinute  shall be
responsible for securing all necessary government approvals and ensuring the
supply of all required utilities, such as electricity, water, communications and
roadways, and China Power shall be responsible for obtaining all required
financing for the plants and operating the plants with the most advanced
technology available. The development and construction of the plants are
estimated to take approximately three (3) years.




Additionally,
China Holdings, Inc. and its controlled subsidiary : China Power, Inc. have
doubled the commitments for further development, construction and contributions
to The Clean Energy Power Plants/Industry in China, or/and worldwide , include
Wind Energy, Biomass Clean Energy and Hydropower Plants. The Company will speed
up its substantial corporate financings development, and partnerships with
global private equity funds, and structure investments to optimize returns of
the Company’s global investors, stockholders and investments. The company has
increased its commitment to develop and maximize all the stockholders’ value on
a long-terms basis.





(Notes:
The Company & China Power, Inc. has not recorded the tangible assets of the
total 400 Sq KM lands/assets and 2000 MW Wind Power Plants/Projects/ assets /the
proprietary rights as fair-valued tangible assets yet as the year ending as
December 31 2008, but will record the tangible assets of the total 400 Sq KM
lands/assets and 2000 MW Wind Power Plants/Projects/ assets /the proprietary
rights as fair-valued tangible assets after further Valuation for the Company’s
800 Square KM lands/assets/& the proprietary rights as fair-valued tangible
assets  in the Company’s 2nd Quarter
ending in 2009 Financial Statement/SEC Form 10Q in August, 2009).





China Power,
Inc.


TaiHu Biomass Energy
Power/Plant (50MW) Investment Construction Agreement





On
October 28, 2007, China Power entered into a Development and Construction
Agreement (the “Construction
Agreement”) with TaiHu County Government (“TaiHu”), AnHui Province,
People’s Republic of China, pursuant to which China Power was granted the
exclusive right to develop and construct a 50 megawatt biomass energy power
plant. Specifically, under the Construction Agreement, TaiHu has agreed to
provide China Power with the land rights for up to 200 MU, or 133,400 square
meters of land, to develop a biomass energy power plant. China Power has
committed to invest up to 580 million Yuan, or approximately $81,586,000 towards
the development of the power plant.





In
addition to the foregoing, according to the China Central Government’s currently
alternative energy laws related to Biomass Energy Projects, under the
Construction Agreement, TaiHu has guaranteed (i) the financing for up to 65% of
the 580 million Yuan China Power has committed to the development of the power
plant through a local bank at a preferred interest rate, (ii) that 100% of the
power generated by the Biomass Energy plant shall be purchased by the China
State Grid at a purchase price of between 0.60 and 0.65 Yuan, or approximately
$0.09 and $0.08, per kilowatt, (iii) this TaiHu Biomass Energy Power Generation
Plant/project has designated with a total potential of 400 million KW/hr power
generation capacity approximately annually, (iv) China Power’s rights under the
Construction Agreement are exclusive.





The
Construction Agreement also provides that TaiHu shall be responsible for
securing all necessary government approvals and ensuring the supply of all
required utilities, such as electricity, water, communications and roadways, and
China Power shall be responsible for obtaining all required financing for the
plant and operating the plant with the most advanced technology available. The
construction of the plant is estimated to take approximately two
years.





Development
of the plant shall be done through America-China (TaiHu) Energy Co. Ltd.,
incorporated under PRC laws by our subsidiary China Power. China Power will
complete for the biomass fuel analysis report and the technical feasibilities
for further development of the construction for TaiHu Biomass Energy Power/Plant
( 50MW) shortly. Management believes that they have no liabilities with regards
to these transactions if the transactions can not be completed.


16




China Power completed the Fuel Analysis
on TaiHu Biomass Energy Power/Plant ( 50MW). China Power has completed THE
FEASIBILITIES STUDY TaiHu Biomass Energy Power/Plant ( 50MW). China Power has also completed THE
FEASIBILITIES STUDY on TaiHu Biomass Energy Power/Plant ( 50MW) as legally
approved,contracted and conducted by CHINA ELECTRIC DESIGN AND RESEARCH
INSTITUTION, the PRC licensed AAA+ power engneering firm. The Comnpany is working on “EPC” -
engineering, procurement and construction expertise /contracts now with China
-State National AAA+ Engineering Firm to construct and build The Company’s TaiHu
Biomass Energy Power/Plant (50MW) on a turnkey basis/solution, and with upset
price guarantees and fixed construction completion timetables. The Company is
also finalizing for the long-term contract with China State-Grid for Electricity
Power Sales Contracts with China-State Alternative Energy Policies Gurrantee for
Biomass Energy for 100% Power Purchase by State-Grid and Gurrantee for Prices
Selling at 0.61 -0.65/KWh.





China Power,
Inc.


Ongniute Biomass Energy
Power/Plant ( 50MW) Investment Construction Agreement





On March
3, 2008, China Power entered into a Development and Construction Agreement (the
“Construction Agreement”) with Ongniute County Government (“Ongniute”), Inner
Mongolia Province, People’s Republic of China, pursuant to which China Power was
granted the exclusive right to develop and construct a 50 megawatt biomass
energy power plant. Specifically, under the Construction Agreement, Ongniute
agreed to provide China Power with the land rights for up to 200 MU, or 133,400
square meters of land, to develop a biomass energy power plant, together with an
additional 500,000 MU, or 333,500,000 square meters of land, rich in straw
resources to support the power plant. Conversely, China Power has committed to
invest up to 580 million Yuan, or approximately $81,586,000, towards the
development of the power plant, including the payment to Ongniute
of 56,000 Yuan, or approximately $7,877, for every 667 square meters of
land provided by Ongniute.





In
addition to the foregoing, under the Construction Agreement, Ongniute has
guaranteed (i) the financing for up to 65% of the 580 million Yuan China Power
has committed to the development of the power plant through a local bank at a
preferred interest rate, (ii) that 100% of the power generated by the biomass
energy plant shall be purchased by the China State Grid at a purchase price of
between 0.60 and 0.65 Yuan, or approximately $0.09 and $0.08, per kilowatt and
(iii) the payment of 13.2 million Yuan, or approximately $1,856,797, to China
Power once construction of the power plant is completed.





The
Construction Agreement also provides that Ongniute shall be responsible for
securing all necessary government approvals and ensuring the supply of all
required utilities, such as electricity, water, communications and roadways, and
China Power shall be responsible for obtaining all required financing for the
plant and operating the plant with the most advanced technology available. The
construction of the plant is estimated to take approximately two
years.





China
Power’s rights under the Construction Agreement are exclusive, such that
Ongniute may not allow the development of any other biomass energy power plants
in Ongniute County for three years. In addition, Ongniute has agreed to ensure
that the plant is not subject to income taxes for its first three years of
operation and then subject to a tax rate of no more than 12.5% for the following
three years.





Development
of the plant shall be done through Ongniute America-China Green Energy Co. Ltd.,
which incorporated under PRC laws which is wholly owned by our subsidiary of
China Power. China Power, Inc. will complete for the biomass fuel analysis
report and the technical feasibilities for further development of the
construction for Ongniute Biomass Energy Power/Plant ( 50MW) shortly. Management
believes that they have no liabilities with regards to these transactions if the
transactions can not be completed.


17


China
Power completed the Fuel Analysis Report on Ongniute Biomass Energy Power/Plant
( 50MW)。CHINA
ELECTRIC DESIGN AND RESEARCH INSTITUTION is working on FEASIBILITIES STUDY on
Ongniute Biomass Energy Power/Plant ( 50MW)ò The Comnpany is working on “EPC” -
engineering, procurement and construction expertise /contracts now with China
-State National AAA+ Engineering Firm to construct and build The Company’s
Ontniute Biomass Energy Power/Plant ( 50MW) on a turnkey basis/solution, and
with upset price guarantees and fixed construction completion timetables. The
Company is also finalizing for the long-term contract with China State-Grid for
Electricity Power Sales Contracts with China-State Alternative Energy Policies
Gurrantee for Biomass Energy for 100% Power Purchase by State-Grid and Gurrantee
for Prices Selling at 0.61 -0.65/KWh.




China Power,
Inc.


Huaxian Biomass Energy
Power/Plant ( 50MW) Investment Construction Agreement





On March
19, 2008, China Powerentered into a Development and Construction Agreement (the
“Construction
Agreement”) with Huaxian County Government (“Huaxian”), Hunan Province,
People’s Republic of China, pursuant to which China Power was granted the
exclusive right to develop and construct a 50 megawatt biomass energy power
plant. Specifically, under the Construction Agreement, Huaxian has agreed to
provide China Power with the land rights for up to 200 MU, or 133,400 square
meters of land, to develop a biomass energy power plant. Conversely, China Power
has committed to invest up to 580 million Yuan, or approximately $81,586,000
towards the development of the power plant.





In
addition to the foregoing, according to the China Central Government’s currently
alternative energy laws related to Biomass Energy Projects, under the
Construction Agreement, Huaxian has guaranteed (i) the financing for up to 65%
of the 580 million Yuan China Power has committed to the development of the
power plant through a local bank at a preferred interest rate, (ii) that 100% of
the power generated by the Biomass Energy plant shall be purchased by the China
State Grid at a purchase price of between 0.60 and 0.65 Yuan, or approximately
$0.09 and $0.08, per kilowatt, (iii) this Huaxian Biomass Energy Power
Generation Plant/project has designated with a total potential of 400 million
KW/hr power generation capacity approximately annually, (iv) China Power’s
rights under the Construction Agreement are exclusive.




The
Construction Agreement also provides that Huaxian  shall be
responsible for securing all necessary government approvals and ensuring the
supply of all required utilities, such as electricity, water, communications and
roadways, and China Power shall be responsible for obtaining all required
financing for the plant and operating the plant with the most advanced
technology available. The construction of the plant is estimated to take
approximately two years. Management believes that they have no liabilities with
regards to these transactions if the acquisitions can not be
completed.




LongHua Biomass Energy Power
Plant/ Project(50MW) Investment and Construction Agreement





On
October 10, 2007, China Power entered into an agreement with LongHua Government
and BeiJing JinRenTaiHe Trade Ltd.  Government to develop and
construct a biomass energy power generation plant with a power capacity of 50MW.
The parties estimate that it will take 2 years to complete the construction of
the biomass energy generation plant at a cost of  RMB $580million
(approximately USD$78 million) comprising of a cash investment of 35% and bank
loans of 65%. The biomass energy power plant will be located at LongHua county
in the town of TangTouGou village of LuoYing on a total of 200 MU lands. The
Agreement provides that the LonHua Government will pay for the cost of the land
and shall grant China Power the right to use the land for a term of 50 years in
accordance with the State’s land use policy.





Pursuant
to the terms of the agreement, the LongHua government will be responsible for
(A) the coordination with the state, provincial and city governments; (B)
registration of the project with the required governmental bodies; (C) providing
tax incentives to China Power upon completion of the project; (D) assisting the
Company with obtaining an additional 10-15 MU lands for the cultivation of the
necessary biomass resources; and (E) allowing the Company to construct a well to
provide water for construction of the plant.The Company agreed to
provide the LongHua government with RMB$1.65 million (approximately USD$222,000)
in connection with the documentation and approval process necessary for the
construction permits for the biomass plant.  The LongHua government
has agreed to provide the Company will legal exclusive rights for the
construction and operation of the plant and agreed not to engage in the
construction of a similar biomass plant.


18




On
January 23 2008, China Power executed an Amended Agreement with BeiJing
JinRenTaiHe Trade Ltd. and Long-Hua Local Government that the 100% development
rights of LongHua County Biomass Energy Power Plant/ Project (50MW) for further
Investment and Construction Agreement will be fully legally 100% Development
Rights transfer to China Power.





China
Power will complete the biomass fuel analysis report and the technical
feasibilities for further development of the construction for Long-Hua Biomass
Energy Power/Plant ( 50MW) shortly. Management believes that they have no
liabilities with regards to these transactions if the transactions can not be
completed.





China Power,
Inc.


Con Yang Biomass Energy
Power Plant/ Project(50MW) Investment and Construction
Agreement





On
October 29, 2007, China Power entered into an agreement to cooperate with the
Con Yang Government. Pursuant to the agreement the Con Yang Government agreed to
provide the Company with 200 MU lands in the Con Yang economic industry zone to
develop and construct a biomass energy generation plant. The agreement
contemplates the entry into a Lands Rights Agreement with the Con Yang
Government Land & Resources Department for a term of 50 years. The parties
anticipate that the total cost of the project to be RMB $580 million
(approximately USD$78 million) comprising of a cash investment of 35% and bank
loans of 65% and anticipate completion in 2010. The Agreement provides that the
Con Yang Government will provide the Company will the lands for the cultivation
of the straw and raw materials necessary for the project for a term of 50 years.
In addition, the Agreement provides that it will be effective in 6 months until
China provides a biomass projects feasibility study and contemplates the entry
into a further agreement for execution of the biomass energy projects.Management believes that
they have no liabilities with regards to all the transaction if the transaction
can not be completed.





(Notes:
The Company has not recorded the tangible assets of the total 250 Megawatts
Renewable Biomass Power Plants/ Assets purchaseas
fair-valued tangible assets yet as the year ending as December 31 2008, but will
record the recorded  the total 250 Megawatts
RenewableBiomass  Power Plants/ Assets as fair-valued tangible assets
after further Valuations on the Company’s 250 Megawatts Renewable Biomass Energy
Power Plants/Projects/Assets Valuation  in the Company’s 2nd Quarter
ending in 2009 Financial Statement/SEC Form 10Q in August,
2009)





China Power,
Inc.


Acquisition Agreement with
Hunan Zhangjiajie Chalinhe Electric Power Co., Ltd to Acquiring 100% Interest of
Chalinhe Hydropower Station (54 MW-72MW)





On July
27 2007, China Power, Inc. entered into an acquisition definitive agreement for
the acquisition of Hunan Zhangjiajie Chalinhe Electric Power Co., Ltd and
its Chalinhe Hydropower Station (54 MW-72MW). The purchase price
for the assets shall consist of (i) a cash payment in the amount of 380 million
RMB (approximately USD$50 million), and (ii) the assumption of a bank loan in
the amount of 300 million RMB ($USD40 million).The
Chalinhe Hydropower Station comprises a reservoir with a dam 95 meters
high and a total land position of 90,064 square meters. Specifications for the
dam consist of a dead water level of 77 meters, design flood level of 88.31
meters, check flood level of 92.81 meters and a total power generation capacity
of 72,000 kW (4×18,000 kW).





Upon
completion of the first stage of the power station, Chalinhe Electric Power Co.
anticipates the total installed power production capacity will be approximately
54,000 kW. However, implementation of the first stage of the project is
dependent on Hunan Zhangjiajie Chalinhe Electric Power raising sufficient funds.
Hunan Zhangjiajie Chalinhe Electric Power does not currently have any financing
commitments and there is no guarantee that they will be able to raise any funds
to implement their plans.


19





The
electricity sale price is expected to be RMB 0.316 Yuan/kWh (or approximately
USD $0.042/kWh) pursuant to an existing contract with the China State Grid. In
addition, the Chalinhe Hydropower Station has full legal approved rights to CDM
(Clean Development Mechanism) projects and full legal rights for development of
an additional 18,000 kW capacity to bring the total power generation capacity to
72,000 kW.





The
Agreement contemplates that the transaction will be completed at a closing to be
held on the first business day after the closing conditions are met or waived,
or on a date agreed upon by the parties. The closing conditions include, but are
not limited to: (i) the satisfactory completion by each party of a review of the
business operations, finances, assets and liabilities of the other party, (ii)
delivery of such certificates and closing documents as each party's counsel may
request, and (iii) the approval of all of the shareholders of Hunan Zhangjiajie
Chalinhe Electric Power Co., Ltd.





The
acquisition is subject to the Company completing certain due diligence
requirements and obtaining financing from third parties. As of June 30
2008, the transaction has not closed. Management has not determined if it can
complete this transaction. Management believes that they have no liabilities
with regards to this transaction if the acquisition can not be
completed.





China Minerals Holdings,
Inc.


Acquisition Transaction
Agreement with Tong Ren KaiYu Minerals Co. Ltd.





On
November 30, 2007, the Company entered in a transaction agreement which provides
for the acquisition by the Company of 100% of the issued and outstanding shares
of Tong Ren KaiYu Minerals Co. Ltd. This agreement provides the comprehensive
terms of the acquisition and expands on the parties’ agreement dated October 27,
2007.





In
consideration for the shares, the Company agreed to pay (A) RMB $100 million
(approximately USD $13,500,000) in cash; (B) RMB $50 million (approximately USD
$6,750,000) in shares of common stock valued at a price of $0.05 per shares; (C)
RMB $150 million (approximately USD $20 million) in shares of common stock
valued at the average of closing price of the Company’s common stock in the 5
day period prior to closing and the 5 day period after the closing.The agreement provides for
a closing when all of the conditions set forth in the agreement have been
fulfilled. Ton Ren KaiYu owns three mineral exploration licenses
and twominingexploration
licenses.Tong Ren KaiYu has agreed
to provide the Company with legal exclusive/first refusal rights for this
acquisition. The parties have agreed to provide each other with all
documentation necessary to complete their due diligence investigation of each
company’s business.The Company has issued
7,000,000 shares of its common stock as a security deposit to “Tong Ren Kai Yu”
and its beneficiary nominee already. The parties agreed that if Tong Ren KaiYu
meets its obligation under the financials and the Company does not consummate
the transaction, then, Tong Ren KaiYu shall have the right to retain the shares.
However, if Tong Ren KaiYu does not complete its obligations under this
agreement the Company will be permitted to place stop transfer restrictions on
the shares.The
Company intends to form a subsidiary in China or Hong Kong to complete the
acquisition withg Ton Ren KaiYu.The acquisition is subject
to the Company completing certain duel diligence requirements and obtaining
financing from third parties. As of June 30 2008, the transaction has not
closed. Management has not determined if it can complete this transaction.
Management believes that they have no liabilities with regards to this
transaction if the acquisition can not be completed.





Future
Development





China
Holdings, Inc. focuses on 800 Square Kilometers of Land for Real Estate
Development in Inner Mongolia, PR China in 2009 – 2016. The multi-billion dollar
value inherent in the China Holdings, Inc. unique position of The Land
Acquisition & Development, Land Right & Ownership for the 800 Square KM
(“Kilometres”) Lands of Residential, Commercial, Industrial and Recreation Lands
in Inner Mongolia PR China are truly extraordinary with multi-billions dollars
values,  and the progress the Company has made on its initiatives for
the coming years signals the ability to capitalize on the underlying potential
multi-billions dollars assets & profits of land /real estate/properties
development in Inner Mongolia, China.


20




China
Holdings, Inc.  is developing the Phase I: 100 Square
Kilometers of Land Development - The Master Plan : The Land and City Planning
now. The Company’s ultimate master plan will consist of 100 Square Kilometers of
land in Inner Mongolia, PR China. The Company’s objective is to maximize the
value of every square meter of land to China Holdings, Inc. and its
shareholders’ ultimate benefit. The master plan will be not only exciting but a
presentation package that will assist China Holdings’ further worldwide
marketing efforts to develop and partially sell 100 Square KM land parcels in
multi-billion dollars as ultimate values.





China
Holdings, Inc. is going to develop An Initial Public Offering (“IPO”)
US$200 - $400 million  of “China Holdings, Inc.” in 2010 – 2011
upgrades to : i. NASDAQ Small Cap Market or New York Stock Exchange, USA, and
ii. Toronto Stock Exchange (TSX or TSX –V), Canada, and iii. AIM in London Stock
Exchange, England




If we are
successful in raising $200 million of  IPO financing in order to
expand our business and fund future development, we anticipate the following
expenses over the next twelve months: (a) $200,000 to develop our Internet
website and e-commerce system in multi-languages; (b) $400,000 for media
advertising to promote our brand name; (c) $400,000 for our research and
development program; (d) $400,000 for an investor relations program; (f)
$800,000 for professional and consultant fees; (g) $1,800,000 for general
working capital, including land/projects development, general and administrative
expenses; and (h) $186,000,000 for land/real estate/properties development ,
and  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
land/real estate/properties development, 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 December 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 becomea diversified global
assets holding company. We and our subsidiaries engage in multiple China-focused
business activities including land/real estate, energy, renewable energy,
resources, utilities, and pharmaceutical. China Holdings, Inc. focuses
on 800 Square Kilometers of Land for Real Estate Development in Inner Mongolia,
PR China in 2009 – 2016. 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.The multi-billion dollar value inherent in
the China Holdings, Inc. unique position of The Land Acquisition &
Development, Land Right & Ownership for the 800 Square KM (“Kilometres”)
Lands of Residential, Commercial, Industrial and Recreation Lands in Inner
Mongolia PR China are truly extraordinary with multi-billions dollars
values,  and the progress the Company has made on its initiatives for
the coming years signals the ability to capitalize on the underlying potential
multi-billions dollars assets & profits of land /real estate/properties
development in Inner Mongolia, China.


21




China
Holdings, Inc. intends to seek financing for USD$200-$400 millions via an
Initial Public Offering (IPO) in 2010-2011 to fund its 800 Sq KM land/real
estate/properties development/constructions. 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 IPO financing  & the business will be successfully
developed.





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.  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.




China
Power intends to seek financing for USD$200-400 millions via an Initial Public
Offering (IPO) in 2010-2011 to fund its wind power, biomass energy and
hydropower 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 & the business will be successfully developed.




Market
Analysis





Wind
Energy in China





Wind
power is sustainable and clean energy. Compared with conventional energy,
generating electricity from the wind does
not need fuel; hence there is no risk of a fuel price rise. There are no
environmental costs, such as carbon emissions,
in the generation process. Wind power has the added advantage that it is widely
available worldwide. In many
countries wind power has become a major part of their plans for sustainable
development. According to the Global
Wind Energy Council, the wind industry has been expanding at an annual growth
rate of 28% over the past ten years. Global cumulative installed capacity has
reached 74GW and the level of annual investment about €18 billion. In
2006, wind power investment in China was RMB 16.27 billion yuan, accounting for
9% of the global total. If its growth rate is maintained, China could become the
largest wind market in the world.





China is
rich in wind resources. The technically exploitable resource is 1,000GW,
distributed across the southeast coastal areas, adjacent islands, Inner
Mongolia, Xinjiang, the Gansu Hexi Corridor, Huabei and the Qinghai-Tibetan
Plateau. China has chosen wind power as an important alternative source in order
to rebalance the energy mix, combat global warming and ensure energy security.
Supportive measures have been introduced. In order to encourage technical
innovation, market expansion and commercialization, development targets have
been established for 2010 and 2020, concession projects offered and policies
introduced to encourage domestic production. By the end of 2006, cumulative
installed wind capacity had reached 2.6GW; the average annual growth rate over
the past ten years has been 46%. Between 2004 and 2006, China's ranking in the
world wind energy league moved up from the top 10 to the top 6, and the country
is planning to host some of the biggest wind farms in the world. At the present
growth rate, the 2010 target will be reached two years earlier. Wind power has
not just contributed to supplying electricity but has lowered supply costs,
reduced carbon emissions and helped to limit air pollution. The growing wind
power market has encouraged domestic production of wind turbines. By the end of
2006 there were more than 40 companies involved in manufacture. Domestic
products accounted for 41.3% of the annual market in 2006, an increase of ten
percentage points. During the construction of more than 100 wind farms, a lot of
experience and expertise has been gained in construction and operation. This is
fundamental for the future development of wind power. Although grid-connected
wind power is the current area of development in China, the off-grid market is
the largest in the world, particularly for rural
electrification.


22




China's
Wind EnergyResource





Throughout
China's vast land mass and long coastline there is a rich resource of wind
energy with great development potential. In the late 1980s and during 2004-2005,
the National Meteorological Bureau conducted the second and third general
investigations of the resource, concluding that at 10 metres height above
ground, the theoretically exploitable wind resource was 3,226GW and 4,350GW
respectively, and the technically exploitable wind resource 253GW and 297GW. In
addition, the United Nations Environment Programme (UNEP) organised an
evaluation of the wind energy resource in China by using a data modeling method.
This concluded that at 50m above ground level the technically exploitable wind
energy resource would reach 1,400GW. In 2006, the National Climate Center also
applied a data modeling method to assess the wind energy resource in China,
concluding that at 10 m height above ground level, and without taking into
account the Qinghai-Tibet Plateau, the technically exploitable wind energy
resource is about 2,548GW. This is much larger than the outcome of the third
general investigation. According to the results of the third general
investigation, the technically exploitable land area (with a wind power
intensity of over 150W/m2) is approximately 200,000km2. Taking a ratio of
3-5MW/km2, the resulting exploitable wind power capacity would be 600-1,000GW.
According to the Report on Coastal Resources, there is a further 157,000 km2 of
coastal areas round China where the water depth is 0-20m. In 2002, a National
Plan on Ocean Usage was published, which designated areas suitable for shipping,
fishing, entertainment and industrial uses. Taking this into account, if wind
power can be realised at a density of 5MW/km2 over 10%-20% of the ocean area,
then the installed capacity of offshore wind power could reach 100-200GW. In
summary, there is a huge wind power potential in China, of around 700-1,200GW,
which could play a significant role in the country’s future energy supply. The
richest wind energy resources are distributed along the south-eastern coastal
areas and its adjacent islands as well as in the north (north-east, north and
north-west China). There are also some parts of inland China that are rich in
wind resources, as well as off-shore.




Development
of State- Grid-Connected Wind Farms





Grid-connected
wind power started to develop in the 1980s, but grew rapidly during the 10th
Five-year Plan, with total installed capacity increasing from 350MW in 2000 to
2,600MW in 2006. The average growth rate during this period was nearly 40%. In
2006 alone, the growth rate was 105%. The installed capacity of wind power in
China enabled the country to move from No.10 in the world to No.6 by the end of
2006. There have been three stages in the development of grid-connected wind
farms: In the
initial demonstration period (1986-1993), the main activity was to build
small-scale demonstration wind farms by utilising grants from foreign donor
countries and loans. Support from the government was mainly in terms of
financial backing, such as investment in wind farm projects or in the
development of wind turbines. In the industrialisation period (1994-2003), the
former Ministry of Electric Power proposed a wind power industrialisation
programme, including the early stages of wind farm construction, at a “National
Wind Power Work Meeting” in 1993. The following year it was decided that the
grid utility should facilitate the connection of wind farms to the nearest grid
and all the electricity generated by wind farms should be purchased. The grid
tariff would be calculated as the sum of power generation costs, loan payments
and a reasonable profit. The difference between the wind electricity price and
the average electricity price would be shared across the whole grid, with the
power company responsible for purchase of the electricity. As the security of
investors was guaranteed, development of wind farms started through loans.
Later, the State Planning Commission laid down that the average electricity
price for wind power should be calculated according to the operational period of
the turbines and the loan payment period extended over 15 years. In addition,
value-added tax was reduced by half to 8.5% for wind power projects. However,
with the reform of the electricity supply system and its transformation into a
competitive market, the wind power industry developed slowly due to its high
cost and vague policy support. In the scaling-up and domestic production period
(2003-2007), the National Development & Reform Commission aimed to
commercialise the wind industry by initiating a wind power concession programme
in 2003, since when it has been held annually. Under this the investors and
developers of wind power projects are selected through bidding, with the aim to
expand the rate of development and improve the manufacturing capacity of
domestically made parts on the one hand, and to lower power generation costs and
reduce electricity prices on the other. A Renewable Energy Law was introduced in
2006 which, together with other measures such as a pricing policy, obligation on
grid companies to purchase renewable electricity, and cost distribution, has
boosted the development of renewable energy in China. As a result the wind
industry has move into a rapid growth phase.


23




Installed
Capacity of Wind Power





By the
end of 2006, the number of wind turbines installed in China amounted to 3,311
units, of which 366 were of 1MW capacity or above, accounting for 11% . With a
total installed capacity of 2,600MW. There were 100 wind farms distributed
across 16 provinces.  Compared to the cumulative capacity of 1,260MW
at the end of 2005, the growth rate in 2006 was 105% (see Figure The estimated
output of grid-connected wind power in 2006 was 3,860GWh (calculated as the
cumulative installed capacity at the end of the previous year plus 50% of the
installed capacity of the current year and the average equivalent full load
hours of 2,000), an increase of 2,200GWh1in a single year.
In 2006, without taking into account the regions of Hong Kong, Macao and Taiwan,
there were 1,454 newly installed wind turbines with a capacity of 1,337MW in
2006, which is more than the total commissioned over the past 20 years. Among
these, 263 were MW or larger capacity wind turbines, accounting for 18% of the
new installations. Compared to the newly installed capacity of 503MW in 2005,
the year-on-year growth rate reached 166% in 2006. Although the majority of
turbines in China are still 600kW, 750kW and 850kW capacity, accounting for 80%
of installed units and 75% of installed capacity, the trend in the future will
be towards MW models. There were no major changes in the installed capacity
distribution by province, but the gap between them was enlarged. The installed
capacity in Inner Mongolia exceeded 500MW, accounting for one fifth of the
total, followed by Hebei, Jilin, Liaoning, Guangdong and Xinjiang with installed
capacities over 200MW. The number of provinces with over 100MW increased from 7
in 2005 to 11 in 2006. Heilongjiang, Shandong, Gansu and Jiangsu are among those
with a cumulative installed capacity of 100MW. In terms of turbine manufacture,
the market share for domestic manufacturers increased in 2006 to 45% (including
joint ventures), among which Jinjiang Gold Wind had the biggest share, with 33%
of the total newly installed capacity and 80% domestic output. Foreign
manufacturers shared 55%, among which Vestas of Denmark, Gamesa of Spain and GE
of the US took the biggest share, with


together
50% of the total newly installed capacity and over 90% of the foreign
share.





China
is on track to lead the global wind market in annual installations by 2011 with
an estimated 10 GW per year, supported by strong political will, improving
incentives, and vast natural and industrial resources • China’s wind development
value chain is evolving with major state generators consolidating their
presence, while IPPs and foreign entrants seize opportunities as project owners,
operators, and technical consultants• Wind turbine and component manufacturers
are stepping up to meet burgeoning demand, striking a balance between quality,
cost, production capacity, and local content. Wind Entering China’s Power Mix:
China’s electricity demand growth (9% to 10% annually) has created a capacity
gap. While energy sector growth plans remain centered around coal, additional
technologies are entering the mix Wind is evolving as one of China’s top four
technology options for new capacity With coal-fired electricity prices rising,
wind is becoming more costcompetitive. Wind is beginning to play a small but
noticeable role in China’s energy mix





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.


24




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.




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.




25





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.





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.


26




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




27




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.




28




China
Health Holdings, Inc.
 www.chinahealthholding.com


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 2009 -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
2009-2013 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 2009-2013 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.





China
Health Holdings, Inc.


Pharmaceuticals
Acquisitions & Development





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 - 2013. 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, 2008, 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 the transactions if the
acquisitions can not be completed.





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.




Interllectual  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.


29


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 legal/ownership rights to the Internet
Domains:  www.chinaholding.net and www.chinapower.us, andwww.chinahealthholding.com.
We do not expect to lose the ability to use these Internet Domains; however,
there can be no assurance in this regard and the loss of either of these
Internet Domains 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 89109-2001 USA, our China office from 2007 to December 31,
2008 is located at 8E - C2, Global Trade mansion, No.9, A, Guanghua Road,
Chaoyang District, Beijing PR China 100020. Our Corporate Mailing Address is
#601 – 110 Dai-You-Bei-Li, HaiDian District, Beijing 100091.  Our
telephone number is:
1-778-995-0789 in North America and 86-10-6280-9561 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 2008 covered by this report.





PART
II





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





Commencing
April 18, 2005 through March 30, 2009, 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
2007 to the Fourth Quarter, 2008.


30





High
                                              
                                              
                                              LowFiscal
      Year 2008First
      Quarter
                                              
                                              $
                                              0.01
                                              
                                              
                                              $
                                              0.008Second
      Quarter
                                              
                                              $
                                              0.01
                                              
                                              
                                              $
                                              0.008Thirds
      Quarter
                                              
                                              $
                                              0.01
                                              
                                              
                                              $
                                              0.008Fourth
      Quarter
                                              
                                              $
                                              0.01
                                              
                                              
                                              $
                                              0.008Fiscal
      Year 2007First
      Quarter
                                              
                                              $
                                              0.185
                                              
                                              
                                              $
                                              0.043Second
      Quarter
                                              
                                              $
                                              0.06
                                              
                                              
                                              $
                                              0.03Third
      Quarter
                                              
                                              $
                                              0.046
                                              
                                              
                                              $
                                              0.022Fourth
      Quarter
                                              
                                              $
                                              0.12
                                              
                                              
                                              $
                                              0.025





The last
reported sales price of our common stock on the OTC Bulletin Board on March 30,
2009 was $0.011 per share.  As of  March 30, 2009, 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, 2009, the Company had a total of 186,600,000 outstanding shares of
Common Stock , and 1,250,000 shares of Series “A” Preferred Stock, and
77,173,669 outstanding and issued of Common Stock Option, and 69,900,000
outstanding and issued of Common Stock Warrants. There are approximately
145stockholders of record of our common stock and 1 holder of our Series “A”
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.





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.


31


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 Plans





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, 2008.


32


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-





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.


33


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.





(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,
2008:





As
of  December 31, 2008, the Company had a total of 186,600,000
outstanding shares of Common Stock , and 1,250,000 shares of Series “A”
Preferred Stock, and 77,173,669 outstanding and issued of Common Stock Option,
and 69,900,000 outstanding and issued of Common Stock Warrants.


34


During
the period ended December 31, 2008, the Company issued a total of 5,992,940
common shares for services at an average of $0.03 per share for a total
consideration of $179,041.





On
January 23, 2008, the Company issued 4,000,000 shares of common stock with a
fair value of $.03 per share for consulting services; $120,000 is included in
consulting services for 2008.





On
February 12, 2008 the Company issued 400,000 shares of common stock with a fair
value of $.04 per share for consulting services.  The shares were
issued in the amounts of 200,000 equally to two individuals, one of which was a
director of the Company; $16,000 is included in consulting services for
2008.





On April
28, 2008, the Company reinstated 875,000 shares of common stock with a fair
value of $.04 per share, which were previously cancelled on December 31, 2006;
$35,000 is included in investor relation services for 2008.





On April
28, 2008, the Company issued 717,940 shares of common stock with a fair value of
$.011 per share for office rent; $8,041 is included in rent expense for
2008.





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
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.





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.





STOCK OPTIONS AND STOCK
WARRANTS





STOCK
OPTIONS





The
Company periodically grants stock options to provide incentive to employees,
officers, and consultants, with resolution and approval from the Board of
Directors. All issuances vest immediately and have varying expiration timelines.
As at December 31, 2008 and 2007, there were 77,173,669 and 10,351,422 of the
outstanding options which were exercisable, respectively. To calculate the
stock-based compensation under SFAS 123R, the Company used the Black-Scholes
pricing model. The Company’s determination of fair value of option-based awards
on the date of grant using the Black-Scholes model is affected by the Company’s
stock price as well as assumptions regarding a number of subjective variables.
These variables include, but are not limited to, the Company’s expected stock
price volatility over the term of the awards, risk-free interest rate, and the
expected life of the options. The risk-free interest rate is based on a treasury
instrument whose term is consistent with the expected life of the stock options.
The expected volatility, holding period, and forfeitures of options are based on
historical experience In 2008 the Company granted 70,322,247 options (2007 –
nil) to employees and consultants that were accounted for pursuant to SFAS No.
123(R) and 123. The weighted-average fair value per stock option granted in
2008  was $0.017 (2007 – $nil). The fair value of the options granted
in 2008 was recorded at $1,215,729 using a Black-Scholes model with the
following weighted average assumptions: no dividend yield, expected volatility
of 284%, risk-free interest rate of 4.85% and an expected life of 8.45
years.


35


The
following table summarizes all stock options granted, exercised and expired in
the years ended December 31, 2007 and 2008:





Shares underlying Options
                                
                                
                                Weighted
                                  Average
                                  Exercise PriceOutstanding
      as of December 31, 2007
                                
                                
                                10,351,422
                                
                                
                                $
                                0.17Granted
                                
                                
                                -
                                
                                
                                
                                -Exercised
                                
                                
                                -
                                
                                
                                
                                -Expired
      or cancelled
                                
                                
                                -
                                
                                
                                
                                -Outstanding
      as of December 31, 2006
                                
                                
                                10,351,422
                                
                                
                                $
                                0.17Granted
                                
                                
                                70,322,247
                                
                                
                                
                                0.02Exercised
                                
                                
                                -
                                
                                
                                
                                -Expired
      or cancelled
                                
                                
                                (3,500,000
                                )
                                
                                
                                0.18Outstanding
      as of December 31, 2008
                                
                                
                                77,173,669
                                
                                
                                $
                                0.03





The
following table summarizes information concerning currently outstanding stock
options as at December 31, 2008.




Exercise
                              Price
                            
                            Options
                              Outstanding
                              December 31,
                              2008
                            
                            
                            Weighted Average
                              Remaining Life in
                              Years
                            
                            
                            Options
                              Exercisable at
                              December 31,
                              2008$       0.100
                            
                            
                            2,500,000
                            
                            
                            
                            0.42
                            
                            
                            
                            2,500,000$       0.100
                            
                            
                            251,422
                            
                            
                            
                            0.46
                            
                            
                            
                            251,422$       0.300
                            
                            
                            600,000
                            
                            
                            
                            0.46
                            
                            
                            
                            600,000$       0.200
                            
                            
                            2,500,000
                            
                            
                            
                            2.00
                            
                            
                            
                            2,500,000$       0.200
                            
                            
                            1,000,000
                            
                            
                            
                            0.10
                            
                            
                            
                            1,000,000$       0.100
                            
                            
                            3,000,000
                            
                            
                            
                            0.00
                            
                            
                            
                            3,000,000$       0.500
                            
                            
                            3,000,000
                            
                            
                            
                            0.92
                            
                            
                            
                            3,000,000$       0.100
                            
                            
                            3,000,000
                            
                            
                            
                            1.43
                            
                            
                            
                            3,000,000$       0.029
                            
                            
                            16,000,000
                            
                            
                            
                            9.42
                            
                            
                            
                            16,000,000$       0.025
                            
                            
                            9,000,000
                            
                            
                            
                            9.47
                            
                            
                            
                            9,000,000$       0.100
                            
                            
                            1,000,000
                            
                            
                            
                            0.74
                            
                            
                            
                            1,000,000$       0.200
                            
                            
                            1,000,000
                            
                            
                            
                            1.74
                            
                            
                            
                            1,000,000$       0.500
                            
                            
                            1,000,000
                            
                            
                            
                            1.74
                            
                            
                            
                            1,000,000$       0.100
                            
                            
                            322,247
                            
                            
                            
                            1.74
                            
                            
                            
                            322,247$       0.011
                            
                            
                            33,000,000
                            
                            
                            
                            9.74
                            
                            
                            
                            33,000,000$      0.030
                            
                            
                            77,173,669
                            
                            
                            
                            7.46
                            
                            
                            
                            77,173,669





A summary
of the 70,322, 247 stock options granted during the year ended December 31, 2008
are listed below:





On May
29, 2008 the Company granted 3,000,000 stock options to an investor relations
firm with an exercise price of $0.10 per share which expire January 1,
2009.


36


On May
29, 2008 the Company granted 3,000,000 stock options to an investor relations
firm with an exercise price of $0.50 per share which expire December 1,
2009.





On June
2, 2008 the Company granted 6,000,000 stock options to a director of the Company
with an exercise price of $0.029 per share for a period of ten
years.





On June
2, 2008 the Company granted 10,000,000 stock options to a director of the
Company with an exercise price of $0.029 per share for a period of ten
years.





On June
5, 2008 the Company granted 2,000,000 stock options to a management consultant
to the Company with an exercise price of $0.10 per share for a period of two
years.





On June
5, 2008 the Company granted 1,000,000 stock options to a management consultant
of the Company with an exercise price of $0.10 per share for a period of two
years.





On June
20, 2008 the Company granted 6,000,000 stock options to a director of the
Company with an exercise price of $0.025 per share for a period of ten
years.





On June
20, 2008 the Company granted 3,000,000 stock options to a consultant of the
Company with an exercise price of $0.025 per share for a period of ten
years.





On
September 26, 2008 the Company granted 3,000,000 stock options to an investor
relations consultant of the Company.  The options are segregated in
three equal denominations of 1,000,000, and three separate exercise prices of
$0.10, $0.20 and $0.50 with respective expiry terms of one year, two years and
two years accordingly.





On
September 26, 2008 the Company granted 322,247 stock options to an IT consultant
of the Company with an exercise price of $0.10 per share for a period of two
years.





On
September 26, 2008 the Company granted 10,000,000 stock options to an energy
consultant of the Company with an exercise price of $0.0112 per share for a
period of ten years.





On
September 26, 2008 the Company granted 17,000,000 stock options to a director of
the Company with an exercise price of $0.0112 per share for a period of ten
years.





On
September 26, 2008 the Company granted 6,000,000 stock options to a director of
the Company with an exercise price of $0.0112 per share for a period of ten
years.





STOCK
WARRANTS





The
Company periodically grants warrants to non-employees for various services and
remuneration arrangements, with resolution and approval from the Board of
Directors. All issuances vest immediately and have varying expiration timelines.
As at December 31, 2008 and 2007, there were 69,900,000 and 74,650,000 of the
outstanding warrants which were exercisable, respectively.  To
calculate the stock-based compensation under SFAS 123R, the Company used the
Black-Scholes pricing model. The Company’s determination of fair value of
option-based awards on the date of grant using the Black-Scholes model is
affected by the Company’s stock price as well as assumptions regarding a number
of subjective variables. These variables include, but are not limited to, the
Company’s expected stock price volatility over the term of the awards, risk-free
interest rate, and the expected life of the options. The risk-free interest rate
is based on a treasury instrument whose term is consistent with the expected
life of the stock options. The expected volatility, holding period, and
forfeitures of options are based on historical experience.  In 2008
the Company granted nil options (2007 – 45,000,000) to consultants that were
accounted for pursuant to SFAS No. 123(R) and 123. The weighted-average fair
value per warrant issued in 2007 were  $0.064 (2008 – $nil). The fair
value of the warrants granted in 2007 was recorded at $2,873,277 using a
Black-Scholes model with the following weighted average assumptions: no dividend
yield, expected volatility of 301%, risk-free interest rate of 4.85% and an
expected life of 5 years.





The
following table summarizes all warrants granted, exercised and expired in the
years ended December 31, 2007 and 2008:


37





Shares underlying Warrants
                                    
                                    
                                    Weighted
                                      Average
                                      Exercise PriceOutstanding
      as of December 31, 2007
                                    
                                    
                                    31,750,000
                                    
                                    
                                    $
                                    0.15Granted
                                    
                                    
                                    45,000,000
                                    
                                    
                                    
                                    0.21Exercised
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Expired
      or cancelled
                                    
                                    
                                    (2,100,000
                                    )
                                    
                                    
                                    0.15Outstanding
      as of December 31, 2006
                                    
                                    $
                                    74,650,000
                                    
                                    
                                    $
                                    0.19Granted
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Exercised
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Expired
      or cancelled
                                    
                                    
                                    (4,750,000
                                    )
                                    
                                    
                                    0.18Outstanding
      as of December 31, 2008
                                    
                                    $
                                    69,900,000
                                    
                                    
                                    $
                                    0.19





The
following table summarizes information concerning currently outstanding warrants
as at December 31, 2008.




Exercise
                                        Price
                                      
                                      Warrants
                                        Outstanding
                                        December 31, 2008
                                      
                                      
                                      Weighted Average
                                        Remaining Life
                                        in Years
                                      
                                      
                                      Warrants
                                        Exercisable at
                                        December 31,
                                        2008$         0.10
                                      
                                      
                                      20,000,000
                                      
                                      
                                      
                                      2.81
                                      
                                      
                                      
                                      20,000,000$         0.20
                                      
                                      
                                      37,900,000
                                      
                                      
                                      
                                      4.78
                                      
                                      
                                      
                                      37,900,000$         0.15
                                      
                                      
                                      6,000,000
                                      
                                      
                                      
                                      3.17
                                      
                                      
                                      
                                      6,000,000$         0.30
                                      
                                      
                                      1,000,000
                                      
                                      
                                      
                                      0.83
                                      
                                      
                                      
                                      1,000,000$         0.50
                                      
                                      
                                      5,000,000
                                      
                                      
                                      
                                      3.84
                                      
                                      
                                      
                                      5,000,000$      
              -
                                      
                                      
                                      69,900,000
                                      
                                      
                                      
                                      3.95
                                      
                                      
                                      
                                      69,900,000





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.





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.


38


Background





China Holdings,
Inc.


www.chinaholding.net





China
Holdings Inc. (the "Company"),  founded by our Chairwoman and Chief
Executive Officer, Julianna Lu,  was incorporated in the state of
Nevada in the United States of America on April 3, 2002 as AE&E
Pharma Corporation. The Company changed its name on May 25, 2004, to China
Health Holding, Inc. On April 18, 2005, our common stock was approved for
quotation on the OTC Bulletin Board under the symbol "CHHH."  On May 1,
2007, the Company changed its name to China Holdings, Inc. The Company's common
stock trades on the US over-the-counter bulletin board under the
symbol "CHHL”. And  The Company's new CUSIP number is 16942B 102. The
Company's web site is www.chinaholding.net.





China
Holdings, Inc. is a development-stage diversified global assets holding company
headquartered in the U.S.  The Company and its subsidiaries are
engaging in multiple China-focused business activities including, land &
real estate development, energy, renewable energy, resources, utilities, and
pharmaceutical ventures. In 2009, China Holdings is focusing on developing
a total of 800 Square Kilometers of Land for Real Estate Development in Inner
Mongolia PR China , which including commercial buildings, and residential
development, five star hotels, shopping centers, casinos, golf courses as well
as horse racing facilities and recreation and entertainment facilities, a new
city will have a cosmopolitan flavors combining architecture from many of the
world’s great cities including Las Vegas, Paris, London, Rome, Venice,
Vancouver, Tokyo, New York, and a new city with a planned initial population of
one million people in 2009-2016 in Inner Mongolia PR China.





The
Company’s wholly-owned subsidiary: China Power, inc. is developing &
construction of a total 2000 MW Wind Power Plants/Projects on a total of 400
Square KM (“Kilometers”) Land now in Inner Mongolia, PR China 2008 -2012. China
Power, Inc. is also developing & construction of a total 250 MW Biomass
Waste to Energy Plants/Projects (5) on a total of 580,000 Mu  Lands
across China  in 2008 -2012. China Power, inc. is developing its
renewable energy power plants in wind energy power plants, biomass clean energy
& hydropower plants to reach a total potential power capacity of
approximately 850 MW to 3200 MW in 2013 approximately.





China
Holdings ’s 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. The Company has had nominal revenues since its
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, 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.





Subsidiaries


Operations and
Plans





China Power,
Inc.


www.chinapower.us


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 developing 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.


39





China
Power, inc. is developing & construction of a total 2000 MW Wind Power
Plants/Projects on a total of 400 Square KM (“Kilometers”) Land now in Inner
Mongolia, PR China 2008 -2012. China Power, Inc. is also developing &
construction of a total 250 MW Biomass Waste to Energy Plants/Projects (5) on a
total of 580,000 Mu  Lands across China  in 2008 -2012.
China Power, inc. is developing its renewable energy power plants in wind energy
power plants, biomass clean energy & hydropower plants to reach a total
potential power capacity of approximately 850 MW to 3200 MW in 2013
approximately.





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.


www.chinahealthholding.com





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 2009-2013 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.





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.


40


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.
The amounts outstanding loan were $2,085,508 as at December 31
2008  (2007 - $1,271,932) which are due to Julianna Lu, the Company’s
CEO/Founder/Chairwoman for a total of $1,630,489 (2007 - $974,447) and also due
to Xiaofei Yu, the Company’s Vice Chairman for or a total of $455,018
($297,484). Accrued interest expense to directors and shareholders for the Years
ended December 31, 2008 and 2007 was $171,311 and $102,032, respectively. 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.





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.


41


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.


42


* 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.





Critical
Accounting Policies and Estimates





Fair
Value of Financial Instruments





As of
January 1, 2008, we adopted on a prospective basis certain required provisions
of Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value
Measurements, as amended by Financial Accounting Standards Board (FASB)
Financial Staff Position (FSP) No. 157-2, on the effective date of FASB
Statement No. 157. Those provisions relate to our financial assets and
liabilities carried at fair value and our fair value disclosures related to
financial assets and liabilities. SFAS 157 defines fair value, expands related
disclosure requirements and specifies a hierarchy of valuation techniques based
on the nature of the inputs used to develop the fair value measures. Fair value
is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. There are three levels of inputs to fair value
measurements - Level 1, meaning the use of quoted prices for identical
instruments in active markets; Level 2, meaning the use of quoted prices for
similar instruments in active markets or quoted prices for identical or similar
instruments in markets that are not active or are directly or indirectly
observable; and Level 3, meaning the use of unobservable inputs. Observable
market data should be used when available.


43


Most, but
not all, of our financial instruments are carried at fair value, including, all
of our cash equivalents, investments classified as available for sale securities
and assets held for sale and are carried at fair value, with unrealized gains
and losses, net of tax. Virtually all of our valuation measurements are Level 1
measurements. The adoption of SFAS 157 did not have a significant impact on our
consolidated financial statements.





Marketable
Securities





Through
our Advisory Services division, we receive securities which include common stock
and common stock purchase warrants from client companies as compensation for
consulting services. We classify these securities as investments in marketable
securities available for sale or investment in marketable securities available
for sale-related party. These securities are stated at their fair value in
accordance with SFAS No. 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 ”. Unrealized gains or losses in investments in marketable
securities available for sale are recognized as an element of other
comprehensive income on a monthly basis based on fluctuations in the fair value
of the security as quoted on an exchange or an inter-dealer quotation system.
Realized gains or losses are recognized in the consolidated statements of
operations when the securities are liquidated.





To date,
all securities (exclusive of preferred stock and warrants) received from our
client companies as compensation are quoted either on the Over the Counter
Bulletin Board or the Pink Sheets. The securities are typically restricted as to
resale. Our policy is to liquidate securities received as compensation when
market conditions are favorable for sale. As these securities are often
restricted, we are unable to liquidate these securities until the restriction is
removed. We recognize revenue for 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 available for sale and on marketable securities available for
sale-related party are recognized as an element of comprehensive income on a
monthly basis based on changes in the fair value of the security as quoted on an
exchange or an inter-dealer quotation system. Once liquidated, realized gains or
losses on the sale of marketable securities available for sale and marketable
securities available for sale-related party are reflected in our net income for
the period in which the security was liquidated.





Other-than-temporary
impairment of securities are evaluated periodically to determine whether a
decline in their value is other than temporary. Management utilizes criteria
such as the magnitude and duration of the decline, in addition to the reasons
underlying the decline, to determine whether the loss in value is other than
temporary. The term “other-than-temporary” is not intended to indicate that the
decline is permanent. It indicates that the prospects for a near term recovery
of value are not necessarily favorable, or that there is a lack of evidence to
support fair values equal to, or greater than, the carrying value of the
investment. Once a decline in value is determined to be other than temporary,
the value of the security is reduced and a corresponding impairment charge to
earnings is recognized.





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.


44


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.





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.





Property,
Plant and Equipment





Property,
plant and equipment are recorded at cost and depreciated on a straight line
basis over their estimated useful lives of three to forty years. Maintenance and
repairs are charged to expense as incurred. Significant renewals and
improvements are capitalized.





Acquisitions





We
account for acquisitions using the purchase method of accounting in accordance
with the provisions of SFAS No. 141. In each of our acquisitions for the periods
presented, we determined that fair values were equivalent to the acquired
historical carrying costs.





Comprehensive
Income





We follow
Statement of Financial Accounting Standards No. 130 (SFAS 130) “Reporting Comprehensive
Income” to recognize the elements of comprehensive income. Comprehensive
income is comprised of net income and all changes to the statements of
stockholders’ equity, except those due to investments by stockholders, changes
in paid-in capital and distributions to stockholders. Comprehensive income
for  the year s ended as  December31, 2008 & 2007
included net income, foreign currency translation adjustments, unrealized gains
or losses on marketable securities available for sale, net of income taxes, and
unrealized gains or losses on marketable securities available for sale-related
party, net of income taxes.


45


Foreign
Currency Translation





The
accompanying consolidated financial statements are presented in United States
dollars. The functional currency of our Chinese subsidiaries is the Renminbi,
the official currency of the People’s Republic of China, (“RMB”). Capital
accounts of the consolidated financial statements are translated into United
States dollars from RMB at their historical exchange rates when the capital
transactions occurred. Assets and liabilities are translated at the exchange
rates as of the balance sheet date. Income and expenditures are translated at
the average exchange rates for the year s ended as  December31, 2008
& 2007.





The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through PRC authorized institutions. No
representation is made that the RMB amounts could have been, or could be,
converted into United States dollars at the rates applied in the
translation.





Impairment
of Long-Lived Assets





In
accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, we periodically review our long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be fully recoverable. We recognize an
impairment loss when the sum of expected undiscounted future cash flows is less
than the carrying amount of the asset. The amount of impairment is measured as
the difference between the estimated fair value and the book value of the
underlying asset. We did not record any impairment charges during  the
year s ended as  December31, 2008 & 2007.





Subsidiaries
Held for Sale





Long-lived
assets are classified as held for sale when certain criteria are met. These
criteria include management’s commitment to a plan to sell the assets; the
availability of the assets for immediate sale in their present condition; an
active program to locate buyers and other actions to sell the assets has been
initiated; the sale of the assets is probable and their transfer is expected to
qualify for recognition as a completed sale within one year; the assets are
being marketed at reasonable prices in relation to their fair value; and it is
unlikely that significant changes will be made to the plan to sell the assets.
We measure long-lived assets to be disposed of by sale at the lower of carrying
amount or fair value, less cost to sell. See Note 14, “Subsidiaries Held
for Sale,” for further information.





Minority
Interest





Under
generally accepted accounting principles when losses applicable to the minority
interest in a subsidiary exceed the minority interest in the equity capital of
the subsidiary, the excess is not charged to the majority interest since there
is no obligation of the minority interest to make good on such losses. We,
therefore, absorbed all losses applicable to a minority interest where
applicable. If future earnings do materialize, we shall be credited to the
extent of such losses previously absorbed.





Income
Taxes





We
accounted for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”.
SFAS No. 109 requires the recognition of deferred tax assets and
liabilities to reflect the future tax consequences of events that have been
recognized in our financial statements or tax returns. Measurement of the
deferred items is based on enacted tax laws. In the event the future
consequences of differences between the financial reporting and tax basis of our
assets and liabilities result in a deferred tax asset, SFAS No. 109
requires an evaluation of the probability of our being able to realize the
future benefits indicated by such assets. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some or the
entire deferred tax asset will not be realized.


46


Basic
and Diluted Earnings per Share





Basic
income per common share is computed by dividing income available to common
shareholders by the weighted average number of shares of common stock
outstanding for the periods presented. Diluted income per share reflects the
potential dilution that could occur if securities were exercised or converted
into common stock or other contracts to issue common stock resulted in the
issuance of common stock that would then share in our income, subject to
anti-dilution limitations.





Revenue
Recognition





We follow
the guidance of the Securities and Exchange Commission's Staff Accounting
Bulletin (“SAB”) No. 104 and SAB Topic 13 for revenue recognition. In general,
we record revenue when persuasive evidence of an arrangement exists, services
have been rendered or product delivery has occurred, the sales price to the
customer is fixed or determinable, and collectability is reasonably
assured.





Stock
Based Compensation





We
account for the grant of stock options and restricted stock awards in accordance
with SFAS 123R, “Share-Based
Payment, an Amendment of FASB Statement No. 123” (“SFAS 123R”). SFAS 123R
requires companies to recognize in the statement of operations the grant-date
fair value of stock options and other equity based compensation.





Recent
Pronouncements





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities-including an amendment of FAS 115 ”.
SFAS 159 allows entities to choose, at specified election dates, to measure
eligible financial assets and liabilities at fair value that are not otherwise
required to be measured at fair value. If a company elects the fair value option
for an eligible item, changes in that item’s fair value in subsequent reporting
periods must be recognized in current earnings. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. SFAS 159 had no impact on our financial
statements as of September 30, 2008, and we will continue to evaluate the
impact, if any, of SFAS 159 on our financial statements.





In
December 2007, the FASB issued SFAS 141 (revised 2007), “Business Combinations”. SFAS
141R is a revision to SFAS 141 and includes substantial changes to the
acquisition method used to account for business combinations (formerly the
“purchase accounting” method), including broadening the definition of a
business, as well as revisions to accounting methods for contingent
consideration and other contingencies related to the acquired business,
accounting for transaction costs, and accounting for adjustments to provisional
amounts recorded in connection with acquisitions. SFAS 141R retains the
fundamental requirement of SFAS 141 that the acquisition method of accounting be
used for all business combinations and for an acquirer to be identified for each
business combination. SFAS 141R is effective for periods beginning on or after
December 15, 2008, and will apply to all business combinations occurring after
the effective date. We are currently evaluating the requirements of SFAS 141R
and the impact of adoption on our consolidated financial
statements.





In
December 2007, the FASB issued SFAS 160, “Non-controlling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51, Consolidated Financial Statements ” (“ARB 51”). This Statement
amends ARB 51 to establish new standards that will govern the (1) accounting for
and reporting of non-controlling interests in partially owned consolidated
subsidiaries and (2) the loss of control of subsidiaries. A non-controlling
interest will be reported as part of equity in the consolidated financial
statements. Losses will be allocated to the non-controlling interest, and, if
control is maintained, changes in ownership interests will be treated as equity
transactions. Upon a loss of control, any gain or loss on the interest sold will
be recognized in earnings. SFAS 160 is effective for periods beginning after
December 15, 2008. We are currently evaluating the requirements of SFAS 160 and
the impact of adoption on our consolidated financial
statements.


47


In March
2008, the FASB issued SFAS 161, “Disclosures about Derivative
Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 is intended to
improve financial reporting about derivative instruments and hedging activities
by requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. We are currently evaluating the requirements of SFAS 161 and the
impact of adoption on our consolidated financial statements.





In May
2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff
Position (“FSP”) APB 14-1,Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement). FSP APB 14-1 clarifies
that convertible debt instruments that may be settled in cash upon either
mandatory or optional conversion (including partial cash settlement) are not
addressed by paragraph 12 of APB Opinion No. 14,Accounting for Convertible Debt and
Debt issued with Stock Purchase Warrants. Additionally, FSP APB 14-1
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB 14-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. We will adopt FSP APB 14-1 beginning in the first quarter of
fiscal 2009, and this standard must be applied on a retrospective basis. We are
evaluating the impact the adoption of FSP APB 14-1 will have on our consolidated
financial position and results of operations.





In May
2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted
Accounting Principles. This standard is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with generally accepted accounting principles in the
United States for non-governmental entities. SFAS No. 162 is effective 60 days
following approval by the U.S. Securities and Exchange Commission (“SEC”) of the
Public Company Accounting Oversight Board’s amendments to AU Section 411,The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. We do not
expect SFAS No. 162 to have a material impact on the preparation of our
consolidated financial statements.





On
September 16, 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities”
to address the question of whether instruments granted in share-based payment
transactions are participating securities prior to vesting. The FSP determines
that unvested share-based payment awards that contain rights to dividend
payments should be included in earnings per share calculations. The guidance
will be effective for fiscal years beginning after December 15, 2008. We are
currently evaluating the requirements of FSP No. EITF 03-6-1.





On
October 10, 2008, the FASB issued FSP No. 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active.This FASB
Staff Position (FSP) clarifies the application of FASB Statement No. 157, Fair Value
Measurements(“Statement 157”), in a market that is not active and
provides an example to illustrate key considerations in determining the fair
value of a financial asset under those circumstances. Statement 157 was issued
in September 2006, and is effective for financial assets and financial
liabilities for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. We
have adopted FSP 157-3 and determined that it had no impact as of September 30,
2008 on our financial statements, and we will continue to evaluate the impact,
if any, of FSP 157-3 on our financial statements.





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.


48


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,





·
            imposition of new regulations or
      the interpretations of such
regulations,





·
            confiscatory
      taxation,


49


·
            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.


50


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.





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.


51


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.





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.


52


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.


53


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:


54





·
            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.





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.


55


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.





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.


56


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.





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.


57


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.


58


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.





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.


59


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.





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.


60


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.




61




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.





62





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.




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.




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 March
6, 2009, China Holdings Inc. (the “Company”) has engaged  “MALONE
& BAILEY, P.C.”as the Company and subsidaries’ independent registered public
accounting  to audit the Company’s financial statements for its fiscal
year ending December 31, 2008 and 2009.During the Company’s two most recent
fiscal years ended December 31, 2007 and 2006, and  through the date
of this report, the Company did not consult with engaged  “MALONE
& BAILEY, P.C.” regarding either the application of accounting principles to
a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company’s consolidated financial
statements, or any other matters that was either the subject of a disagreement
or a reportable event which would require disclosure pursuant to Item
304(a)(2)(ii) of Regulation S-K.





63


On
February 27, 2009, The Company dismissed WEINBERG & COMPANY, P.A. as an
independent registered public accounting firm of China Holdings, Inc. and its
subsidiaries (the "Company”) to audit the Company’s financial statements for its
fiscal year ending December 31, 2008. During the Company’s two fiscal years
ended December 31, 2007, and during the subsequent interim period preceding
engagement of  WEINBERG & COMPANY, P.A. from January 23, 2009 ,
the Company did not consult with WEINBERG & COMPANY, P.A. regarding the
application of accounting principles to a specified transaction, either
completed or proposed, the type of audit opinion that might be rendered on the
Company’s consolidated financial statements, or any other matters or reportable
events described in Item 304(a)(2)(ii) of Regulation S-K.


On
November 17, 2008, The Company dismissed J. Crane CPA, P.C. as an independent
registered public accounting firm of China Holdings, Inc. and its subsidiaries
(the "Company”) to audit the Company’s financial statements for its fiscal year
ending December 31, 2008. During the Company’s two fiscal years ended December
31, 2007, and during the subsequent interim period preceding engagement of J.
Crane CPA, P.C. from May14, 2008 , the Company did not consult with J. Crane
CPA, P.C. regarding the application of accounting principles to a specified
transaction, either completed or proposed, the type of audit opinion that might
be rendered on the Company’s consolidated financial statements, or any other
matters or reportable events described in Item 304(a)(2)(ii) of Regulation
S-K.





On April
23, 2008, the Company dismissed formerly Sherb & Co. LLP (“Sherb”) as
independent registered public accounting firm of China Holdings, Inc. and its
subsidiaries (the "Company"). Sherb’s report on the Company’s financial
statements for the fiscal year ended December 31, 2007 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
Sherb 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. Sherb did not
issue a report on the Company’s financial statements for the fiscal year ended
December 31, 2006. In connection with the audits of the Company’s financial
statements for the year ended December 31, 2007 and the subsequent interim
period through the date of the dismission on April 23, 2008, there were no
disagreements with Sherb on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures which, if
not resolved to the satisfaction of Sherb would have caused Sherb to make
reference to the matter in their report.  During the most recent
fiscal year and the subsequent interim period through April 23, 2008, there
were no reportable events, as defined in Item 304(a)(1)(v) of
Regulation S-K.





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 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).





64





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.





Item
8A. Controls and Procedures.





(a) Evaluation of Disclosure
Controls and Procedures.Ourmanagement, with the
participation of our principal executive and principal financial officer,
evaluated the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, our
principalexecutive and principal
financial officer concluded that our disclosure controls and procedures as of
the end of the period covered by this report were effective such that the
information required to be disclosed by us in reports filed under the
Securities Exchange Act of 1934 is
(i) recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms and
(ii) accumulated and communicated to our management, including our
principal executive and principal financial officer, as appropriate to allow
timely decisions regarding disclosure.




(b)
 Changes in Internal
Control over Financial Reporting. There were no changes in our
internal control over financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act, during our most recently completed fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.





(c) Inherent Limitations on
Effectiveness of Controls. Our management, including our principal
executive and financial officer, does not expect that our disclosure controls
and procedures or our internal control will prevent all errors and all 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. Further, 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 the company have been
detected.




(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.




(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.





65





(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.




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.





ITEM
1.  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.





66





PART
III





Item 9. Directors, Executive
Officers, Promoters and Control Personsand 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
              
              PositionJulianna
      Lu
              
              Chief
      Executive Officer, Principal Financial Officer, Principal Accounting
      Officer, Treasurer and Chairwoman of the Board of
      DirectorsXiao
      Fei Yu
              
              Vice
      Chairman of Board of DirectorsRonald
      Shon
              
              Chairman
      of Advisory BoardMoxian
      Chen
              
              Senior
      Vice President/General
Manager





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 Chairwoman of the Board
of Directors.Ms. Lu founded and financed ChinaHoldings, Inc.and All Subsidiaries, andhas been ourprincipalChief
Executive Officer, Principal Financial Officer, Principal Accounting Officer,
Treasurer and Chairwoman
of the Board of Directorssince 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.


XiaoFei 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.





67




Ronald Shon,
Chairman of Advisory BoardMr.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 Presiden 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.





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.





68





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, 2008 and December 31, 2007.





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 2008, 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
                
                TotalJulianna
      Lu
                  Chief
      Executive Officer
                
                2007
                
                $
                240,000
                
                
                $
                138,800
                
                
                
                
                
                
                
                
                
                $
                412,9802006
                
                $
                240,000
                
                
                $
                138,800
                
                
                
                —
                
                
                
                —
                
                
                
                $
                378,800Xiao
      Fei Yu
                  Vice
      Chairman of the Board and President
                
                2007
                
                $
                119,724
                
                
                $
                271,400
                
                
                
                
                
                
                
                
                
                
                
                $
                391,124





(1) Ms.
Lu’s salary for 2008 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, 2008, we owed
an aggregate of  USD$1,630,489 to Ms. Julianna Lu.





Outstanding
Equity Awards at Fiscal Year-End Table.




There
were 45,000,000 options and no warrants were granted to our executive officers
during the fiscal year ended December 31, 2008.




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 $30,000 to the Company & all
subsiaries’ Chairperson/Chief Executive Officer/CFO starting on January 1, 2008
(ii) to pay a 3% royalty on gross sales, upon commencement of sales (iii) pay a
monthly consulting fee of $10,000 to a shareholder and officer of the Company to
Mr. Xiaofei Yu, the Vice Chairman of the Company.





On August
3, 2007, the Company appointed Mr. 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.





69





On April
3, 2007, the Company appointed Mr. 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.




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 19, 2009, the Company agrees to issue a
total of 1,000,000 common stocks option at $0.02 to WSR for 12 months effective
periods to exercise as SEC 144 rules/legends.





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 2,000,000 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.





70




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





The
following table sets forth certain information, as of March31, 2009 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 (2 persons)
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          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.


71


Item
12.  Certain Relationships and Related Transactions.




On March
12, 2006, China Health Holdings, Inc (the "Company") agreed to issue 5,000,000
shares of the Company's common stock to Julianna Lu, the Company's Founder and
Chief Executive Officer/Chairpersom, as consideration for the forgiveness of
loans in the aggregate amount of USD$300,000 previously advanced to the Company
by Ms. Lu. As additional consideration, the Company agreed to issue to Ms. Lu,
five year warrants to purchase 10,000,000 shares of the Company's common stock,
exercisable at a price of $.10 and ten year warrants to purchase 10,000,000
shares of the Company's common stock exercisable at a price of $.20. The
warrants have piggy back registration rights with respect to the shares of
common stock issuable upon exercise of the warrants. Upon exercise of the
warrants and payment of the applicable exercise price, the shares of common
stock shall be fully paid and non-assessable and shall have the same rights,
including voting rights, as other shares of common stock of the Company. The
Company claims an exemption from the registration requirements of the Securities
Act of 1933, as amended (the "Act") with respect to the foregoing, pursuant to
Section 4(2) of the Act and/or Regulation D promulgated thereunder.
 
 On
October 12, 2006, China Health Holdings, Inc (the "Company") agreed to issue
10,000,000 shares of the Company's common stock to Julianna Lu, the Company's
Founder and Chief Executive Officer, as consideration for the forgiveness of
loans in the aggregate amount of USD $300,000 previously advanced to the Company
by Ms. Lu. As additional consideration, the Company agreed to issue to Ms. Lu,
five year warrants to purchase 10,000,000 shares of the Company's common stock,
exercisable at a price of $.10 and ten year warrants to purchase 10,000,000
shares of the Company's common stock exercisable at a price of $.20. The
warrants have piggy back registration rights with respect to the shares of
common stock issuable upon exercise of the warrants. The Company claims an
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Act") with respect to the foregoing, pursuant to Section 4(2) of
the Act and/or Regulation D promulgated thereunder.
 
 On
December 22, 2005, the Board of Directors of the Company approved the issuance
of 1,000,000 shares Series A Preferred Stock issued to Julianna Lu at a price of
$0.15 in consideration for the forgiveness of a loan to the Corporation in the
aggregate amount of one hundred and fifty thousand (USD$150,000), subject to the
filing of the Certificate of Designation with the State of Nevada. These shares
were issued pursuant to the exemption from registration provided by Section 4(2)
under the Securities Act of 1933. On February 21, 2006, the "Company" filed a
Certificate of Designation, Powers Preferences and Rights of Series A Preferred
Stock with the state of Nevada. Of the Company's 20,000,000 shares of authorized
preferred stock, the Certificate of Designation authorizes the Company to issue
up to 1,000,000 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 the Company's 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 shareholders of
the Company 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,
etc.
  The
Company has received advances/funds/loans from two major shareholders which bear
interest at 10% per annum with no specific repayment terms. The tables below
detail transactions during the twleve months ended December 31, 2008. The
amounts outstanding loan were $2,085,508 as at December 31 2008 (2007 -
$1,271,932) which are due to Julianna Lu, the Company’s CEO/Founder/Chairwoman
for a total of $1,630,489 (2007 - $974,447) and also due to Xiaofei Yu, the
Company’s Vice Chairman foror a total of
$455,018($297,484).Accrued interest expense
to directors and shareholders for the Years ended December 31, 2008 and 2007 was
$171,311 and $102,032, respectively.
 
 The table
below details transactions related to the loan payable to the Company's
Chairman, Founder and Chief Executive Officer/Julianna Lu during the year ended
December 31, 2008:





Beginning
      balance payable, December 31, 2007
                        
                        $
                        974,448Accrued
      management fees
                        
                        
                        360,000Accrued
      interest
                        
                        
                        133,776Advances
      from Chief Executive Officer
                        
                        
                        162,266Ending
      balance payable, December 31, 2008
                        
                        $
                        1,630,489





72





The table
below details transactions related to the loan payable to the Company's Vice
Chairman/Xiaofei Yu during the year ended December 31, 2008:




Beginning
      balance payable, December 31, 2007
                          
                          $
                          297,484Accrued
      management fees
                          
                          
                          120,000Accrued
      interest
                          
                          
                          37,354Advances
      from Vice Chairman
                          
                          
                          -Ending
      balance payable, December 31, 2008
                          
                          $
                          455,018




Item
13. Exhibits.




Exhibit
      Number
                  
                  Description3.01
                  
                  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)





73




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)





74




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)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)





75





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)





76




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)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)





77





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)11.1
                
                China Power, Inc. - 2000 MW - 2
      Wind Power Plants/Projects with Inner Mongolia Government PR China in
      Septermber 2008 as reference to the Company’s Form 8-K filed with the
      Securities and Exchange Commission  in September 2008Amended 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)11.2
                
                China
      Power, Inc. – 400 Square KM Lands Contract for 2000 MW 2 Wind Power
      Plants/Projects with Inner Mongolia Government PR China in November 2008
      as reference to the Company’s Form 8-K filed with the Securities and
      Exchange Commission in November 2008.11.3
                
                China
      Holdings’s Land Contract - 800 Square KM Lands Contract with Inner
      Mongolia Government PR China in Febuary 2009 as reference to the Company’s
      Form 8-K filed with the Securities and Exchange Commission in March
      2009.





78




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





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, 2008 and 2007 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/10-K, and for
other services normally provided in connection with statutory filings were
$65,968.89 and $57,500 for the years ended December 31, 2007 and December 31,
2008, respectively.
 
 Audit
Related Fees
 
 We
incurred fees of $10,418 for the year ended December 31, 2007 and $13,750 for
the year ended December 31, 2008 approximately, 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, 2008 and December 31,
2007.





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.





79





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: March
      31, 2009
              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
              
              Chairman
      of the Board of Directors
              
              Date: March
      31, 2009Julianna
      Lu
              
              Chief
      Executive Officer, and ChiefFinancial
      Officer/s/ Xiao Fei
      Yu
              
              Vice
      Chairman and Director
              
              Date: March
      31, 2009Xiao
      Fei Yu





80





CHINA
HOLDINGS, INC.





INDEX
TO FINANCIAL STATEMENTS


(2008
Annual Unaudit Consolidated Financial Statement)




PageReports
      of Independent Registered Public Accounting Firm
                          
                          
                          F-1Consolidated
      Balance Sheet as of December 31, 2008 (unaudited)
                          
                          
                          F-3Consolidated
      Statements of Losses for the years ended December 31, 2008
      (unaudited)  and 2007 (audited)and
      the period April 3, 2002 (date of inception) to December 31, 2008
      (unaudited)
                          
                          
                          F-4Consolidated
      Statement of Deficiency in Stockholders' Equity for the
    periodApril
      3, 2002 (date of inception) to December 31, 2008
    (unaudited)
                          
                          
                          F-5Consolidated
      Statements of Cash Flows for the years ended December 31, 2008
      (unaudited)  and 2007
      (audited)and
      the period April 3, 2002 (date of inception) to December 31, 2008
      (unaudited)
                          
                          
                          F-9Notes
      to Consolidated Financial Statements (unaudited)
                          
                          
                          F-10





81




CHINA  HOLDING
INC.


(a
development stage company)


CONSOLIDATED
BALANCE SHEETS





December 31
                
                
                December 31,2008
                
                
                2007un-audited
                
                
                auditedASSETSCURRENT
      ASSETSCash
                
                $
                252
                
                
                $
                9,958Prepaid
      expenses and other current assets
                
                
                24,812
                
                
                
                6,723Total
      current assets
                
                
                25,064
                
                
                
                16,681Property
      ansd equipment, net
                
                
                8,135
                
                
                
                11,622Intangible
      assets
                
                
                3
                
                
                
                3TOTAL
      ASSETS
                
                $
                33,202
                
                
                $
                28,306LIABILITIES
      AND STOCKHOLDERS’ DEFICITCURRENT
      LIABILITIESAccounts
      payable and accrued liabilities
                
                $
                94,978
                
                
                $
                72,110Due
      to related parties
                
                
                2,085,508
                
                
                
                1,271,932Total
      current liabilities
                
                
                2,180,486
                
                
                
                1,344,042Commitments
      and ContingenciesStockholders'
      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, 2,000,000,000 shares authorized 186,400,000 and
      180,607,060 shares issued and outstanding
                
                
                186,600
                
                
                
                180,607Additional
      paid-in capital
                
                
                16,804,348
                
                
                
                15,363,037Deficit
      accumulated during the development stage
                
                
                (19,076,301
                )
                
                
                (16,797,449
                )Accumulated
      other comprehensive loss
                
                
                (63,181
                )
                
                
                (63,181
                )Total
      Stockholders’ Deficit
                
                
                (2,147,285
                )
                
                
                (1,315,736
                )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIT
                
                $
                33,202
                
                
                $
                28,306





See Notes
toConsolidated Financial Statements.


F-3





CHINA
HOLDING INC.


(a
development stage company)


CONSOLIDATED
STATEMENTS OF OPERATIONS





Cumulativeresults ofFor the
                  
                  
                  For the
                  
                  
                  operations fromYear
                  
                  
                  Year
                  
                  
                  April 3, 2002Ended
                  
                  
                  Ended
                  
                  
                  (Inception)December 31
                  
                  
                  December 31
                  
                  
                  December 312008
                  
                  
                  2007
                  
                  
                  2008un-audited
                  
                  
                  audited
                  
                  
                  un-auditedSales
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  8,976Cost
      of goods sold
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  245Gross
      profit
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  8,731Expenses:Advertising
      and promotion
                  
                  
                  25,205
                  
                  
                  
                  45,438
                  
                  
                  
                  192,536Amortization
      of intangible assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,125Consulting
      fees
                  
                  
                  61,263
                  
                  
                  
                  1,211,474
                  
                  
                  
                  4,214,563Stock
      issued for failed acquisition
                  
                  
                  -
                  
                  
                  
                  1,415,000
                  
                  
                  
                  1,415,000Depreciation
                  
                  
                  3,486
                  
                  
                  
                  3,448
                  
                  
                  
                  16,102Interest
      and bank charges
                  
                  
                  171,869
                  
                  
                  
                  102,805
                  
                  
                  
                  462,268Investor
      relations
                  
                  
                  180,522
                  
                  
                  
                  162,194
                  
                  
                  
                  474,195Management
      fees
                  
                  
                  503,079
                  
                  
                  
                  1,159,288
                  
                  
                  
                  3,867,711Office
                  
                  
                  9,323
                  
                  
                  
                  16,337
                  
                  
                  
                  110,272Professional
      fees
                  
                  
                  80,281
                  
                  
                  
                  244,629
                  
                  
                  
                  1,126,145Rent
                  
                  
                  21,352
                  
                  
                  
                  28,310
                  
                  
                  
                  124,558Research
      and development
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,743,593Stock
      based compensation
                  
                  
                  1,215,729
                  
                  
                  
                  3,214,457
                  
                  
                  
                  5,193,051Travel
                  
                  
                  6,301
                  
                  
                  
                  13,888
                  
                  
                  
                  59,013Vehicle
                  
                  
                  -
                  
                  
                  
                  5,258
                  
                  
                  
                  31,049Total
      expenses
                  
                  
                  2,278,412
                  
                  
                  
                  7,622,526
                  
                  
                  
                  19,037,183Net
      loss from operations
                  
                  
                  (2,278,412
                  )
                  
                  
                  (7,622,526
                  )
                  
                  
                  (19,028,452
                  )Other
      income (expenses)Foreign
      exchange gain or loss
                  
                  
                  (440
                  )
                  
                  
                  4,054
                  
                  
                  
                  38,601Impairment
      loss-licensing rights
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (182,874
                  )Debt
      forgiveness income
                  
                  
                  -
                  
                  
                  
                  14,400
                  
                  
                  
                  96,423Total
      other income (expenses)
                  
                  
                  (440
                  )
                  
                  
                  18,454
                  
                  
                  
                  (47,850
                  )Net
      loss
                  
                  $
                  (2,278,852
                  )
                  
                  $
                  (7,604,072
                  )
                  
                  $
                  (19,076,301
                  )Basic
      net loss per share
                  
                  $
                  (0.01
                  )
                  
                  
                  (0.04
                  )Weighted
      average number of common basic and diluted shares
    outstanding
                  
                  
                  185,500,888
                  
                  
                  
                  114,121,334The
      components of other comprehensive lossNet
      loss
                  
                  $
                  (2,278,852
                  )
                  
                  
                  (7,604,072
                  )Foreign
      currency translation adjustment
                  
                  
                  -
                  
                  
                  
                  (3,262
                  )Comprehensive
      loss
                  
                  $
                  (2,278,852
                  )
                  
                  
                  (7,607,334
                  )




F-4





CHINA  HOLDING
INC.


(a
development stage company)


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Cumulativeresults ofFor the
                      
                      
                      For the
                      
                      
                      operations fromYear
                      
                      
                      Year
                      
                      
                      April 3, 2002Ended
                      
                      
                      Ended
                      
                      
                      (Inception)December 31
                      
                      
                      December 31
                      
                      
                      December 312008
                      
                      
                      2007
                      
                      
                      2008un-audited
                      
                      
                      audited
                      
                      
                      un-auditedOPERATING
      ACTIVITIESNet
      loss
                      
                      $
                      (2,278,852
                      )
                      
                      $
                      (7,604,072
                      )
                      
                      $
                      (19,076,301
                      )Adjustments
      to reconcile net loss to cash usedin
      operating activities:Accrued
      interest
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      181,570Amortization
      of intangible assets
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      7,125Amortization
      of deferred compensation
                      
                      
                      
                      
                      
                      
                      153,942
                      
                      
                      
                      153,942Stock
      options expense
                      
                      
                      1,268,263
                      
                      
                      
                      338,180
                      
                      
                      
                      2,169,053Depreciation
                      
                      
                      3,486
                      
                      
                      
                      3,448
                      
                      
                      
                      16,102Impairment
      loss-licensing rights
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      182,874License
      rights
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      1,359,999(Gain)
      loss on settlement of debt and issuance of shares
                      
                      
                      
                      
                      
                      
                      (14,400
                      )
                      
                      
                      (104,924
                      )Issuance
      of shares to settle debt and cover financing
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      -Non
      cash expenses paid with shares
                      
                      
                      179,041
                      
                      
                      
                      -
                      
                      
                      
                      3,382,631Non
      cash interest paid with shares
                      
                      
                      
                      
                      
                      
                      326,360
                      
                      
                      
                      326,360Stock-based
      compensation
                      
                      
                      -
                      
                      
                      
                      1,614,537
                      
                      
                      
                      3,319,191Warrant
      issued for Compensation
                      
                      
                      
                      
                      
                      
                      2,876,277
                      
                      
                      
                      3,639,142Stock
      issued for failed acquisition
                      
                      
                      
                      
                      
                      
                      1,415,000
                      
                      
                      
                      1,415,000Changes
      in operating assets and liabilities
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      -Prepaid
      expenses and other current assets
                      
                      
                      (18,089
                      )
                      
                      
                      91,036
                      
                      
                      
                      126,322Accounts
      payable and accrued liabilities
                      
                      
                      22,868
                      
                      
                      
                      37,103
                      
                      
                      
                      103,358Net
      cash used in operating activities
                      
                      
                      (823,282
                      )
                      
                      
                      (762,589
                      )
                      
                      
                      (2,798,557
                      )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
                      
                      
                      813,576
                      
                      
                      
                      730,510
                      
                      
                      
                      2,836,225Net
      cash provided by financing activities
                      
                      
                      813,576
                      
                      
                      
                      780,510
                      
                      
                      
                      2,886,225EFFECT
      OF EXCHANGE RATE CHANGES
                      
                      
                      
                      
                      
                      
                      (3,262
                      )
                      
                      
                      (63,180
                      )NET
      (DECREASE) INCREASE IN CASH
                      
                      
                      (9,706
                      )
                      
                      
                      9,958
                      
                      
                      
                      252CASH,
      BEGINNING OF PERIOD
                      
                      
                      9,958
                      
                      
                      
                      -
                      
                      
                      
                      -CASH,
      END OF PERIOD
                      
                      $
                      252
                      
                      
                      $
                      9,958
                      
                      
                      $
                      252Supplemental
      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-5


CHINA
HOLDING INC.


(a
development stage company)


CONSOLIDATED
STATEMENT OF DEFICIENCY IN STOCKHOLDERS





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 price of $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
                                                            )Issued
      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 Sep.
    2005
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            786,690
                                                            
                                                            
                                                            
                                                            787
                                                            
                                                            
                                                            
                                                            243,087
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            243,874Issued
      for consulting at an average of $0.31 per share in Oct.
    2005
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            315,000
                                                            
                                                            
                                                            
                                                            315
                                                            
                                                            
                                                            
                                                            97,335
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            97,650Issued
      for consulting at an average of $0.31 per share in Dec.
    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
                                                            )Issued
      for deferred compensation at an average priceof  $0.129
      per share in January 2006
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            1,134,710
                                                            
                                                            
                                                            
                                                            1,135
                                                            
                                                            
                                                            
                                                            146,030
                                                            
                                                            
                                                            
                                                            (147,165
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Issued
      for deferred compensation at an average priceof  $0.141
      per share in February 2006
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            540,000
                                                            
                                                            
                                                            
                                                            540
                                                            
                                                            
                                                            
                                                            75,960
                                                            
                                                            
                                                            
                                                            (76,500
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Issued
      for consulting, professional and other services at 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 services  at an average
      price $0.102 per share in April 2006
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            950,000
                                                            
                                                            
                                                            
                                                            950
                                                            
                                                            
                                                            
                                                            96,300
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            97,250Issued
      for consulting, professional and other services  at an average
      price $0.10 per share in May 2006
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            250,000
                                                            
                                                            
                                                            
                                                            250
                                                            
                                                            
                                                            
                                                            24,750
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            25,000Issued
      for consulting, professional and other services  at 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 2006
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            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 services  at 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 services  at 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 services  at 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 services  at 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
                                                            )Stock options
      compensation
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            562,609
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            562,609Amortization
      of deferred expense
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            450,612
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            450,612Issue
      of warrants for services
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            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
                                                            )Issued
      for consulting, professional and other services at an  average
      price $0.045 per share in 2007
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            35,376,400
                                                            
                                                            
                                                            
                                                            35,376
                                                            
                                                            
                                                            
                                                            1,579,161
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            1,614,537Issued
      for assets/acquisition payments deposits at an
      average 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
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            0Issued
      to settle debt at an average price $0.059 per share in
2007
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            5,400,000
                                                            
                                                            
                                                            
                                                            5,400
                                                            
                                                            
                                                            
                                                            314,600
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            320,000Issued
      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 an  average price
      0.024 per share in 2007
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            13,380,000
                                                            
                                                            
                                                            
                                                            13,380
                                                            
                                                            
                                                            
                                                            312,980
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            326,360Grant
      of stock options for services
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            338,180
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            338,180Amortization
      of deferred expense
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            153,942
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            153,942Grant
      of warrants for services
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            2,876,277
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            2,876,277Net
      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
                                                            
                                                            
                                                            $
                                                            
                                                            
                                                            
                                                            $
                                                            (16,797,449
                                                            )
                                                            
                                                            $
                                                            (63,181
                                                            )
                                                            
                                                            $
                                                            (1,315,736
                                                            )Issued
      for consulting, professional and other services at an  average
      price $0.03 per share in January 2008
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            4,000,000
                                                            
                                                            
                                                            
                                                            4,000
                                                            
                                                            
                                                            
                                                            116,000
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            120,000Issued
      for consulting, professional and other services at an  average
      price $0.04 per share in June 2008
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            400,000
                                                            
                                                            
                                                            
                                                            400
                                                            
                                                            
                                                            
                                                            15,600
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            16,000Reinstatment
      of stock and associated dividend in April 2008 previously cancelled in
      June 2006
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            875,000
                                                            
                                                            
                                                            
                                                            875
                                                            
                                                            
                                                            
                                                            34,125
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            35,000Issued
      for consulting, professional and other services at an  average
      price $0.011 per share in June 2008
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            717,940
                                                            
                                                            
                                                            
                                                            718
                                                            
                                                            
                                                            
                                                            7,323
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            8,041Grant
      of stock options for services
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            1,215,728
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            1,215,728Grant
      of warrants for services
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            52,534
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            52,534Net
      loss
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            (2,278,852
                                                            )
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            (2,278,852
                                                            )Currency
      translation adjustment
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Balance,
      December 31, 2008
                                                            
                                                            
                                                            1,250,000
                                                            
                                                            
                                                            $
                                                            1,250
                                                            
                                                            
                                                            
                                                            186,600,000
                                                            
                                                            
                                                            $
                                                            186,600
                                                            
                                                            
                                                            $
                                                            16,804,348
                                                            
                                                            
                                                            $
                                                            0
                                                            
                                                            
                                                            $
                                                            (19,076,301
                                                            )
                                                            
                                                            $
                                                            (63,181
                                                            )
                                                            
                                                            $
                                                            (2,147,285
                                                            )





See Notes
to Consolidated Financial Statements.





F-6


CHINA
HOLDINGS INC.
 (a
development stage company)
 
 NOTES TO
CONSOLIDATED UNAUDITED 2008 ANNUAL FINANCIAL STATEMENTS
 FOR THE
TWELVE (12) MONTHS ENDED DECEMBER 31, 2008
 1.            NATURE OF
OPERATIONS
  China
Holdings Inc. (the "Company") was incorporated in the state of
Nevada in the United States of America on April 3, 2002 as AE&E
Pharma Corporation. The Company changed its name on May 25, 2004, to China
Health Holding, Inc. On April 18, 2005, our common stock was approved for
quotation on the OTC Bulletin Board under the symbol "CHHH."  On May 1,
2007, the Company changed its name to China Holdings, Inc. The Company's common
stock trades on the US over-the-counter bulletin board under the
symbol "CHHL”, and The Company's
new CUSIP number is 16942B 102. The Company's web site is www.chinaholding.net.
 
 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. 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
7th, 2008, the Company
incorporated its third subsidiary as China Minerals Holdings,
Inc., a Nevada corporation.
 
 China Holdings, Inc. is a
development-stage diversified global assets holding company headquartered in the
U.S.The Company and its subsidiaries are engaging in
multiple China-focused business activities including, land & real estate
development, energy, renewable energy, resources, utilities, and pharmaceutical
ventures.
 
 China Holdings is focusing on
developing a total of 800 SquareKilometers of Land for Real Estate Development in Inner
Mongolia PR China , which including commercial buildings, and residential
development, five star hotels, shopping centers, casinos, golf courses as well
as horse racing facilities and recreation and entertainment facilities, a new
city will have a cosmopolitan flavors combining architecture from many of the
world’s great cities including Las Vegas, Paris, London, Rome, Venice,
Vancouver, Tokyo, New York, and a new city with a planned initial population of
one million people in 2009-2016 in Inner Mongolia PR
China.
 The
Company’s wholly-owned subsidiary: China Power, inc. is developing &
construction of a total 2000 MW Wind Power Plants/Projects on a total of 400
Square KM (“Kilometers”) Land now in Inner Mongolia, PR China 2008 -2012. China
Power, Inc. is also developing & construction of a total 250 MW Biomass
Waste to Energy Plants/Projects (5) on a total of 580,000 Mu  Lands
across China  in 2008 -2012. China Power, inc. is developing its
renewable energy power plants in wind energy power plants, biomass clean energy
& hydropower plants to reach a total potential power capacity of
approximately 850 MW to 3200 MW in 2013 approximately.
 
 China Holdings ’sobjective 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. The Company
has had nominal revenues since its inception.
 
 Certain
reclassifications have been made to prior year amounts to conform to the current
year presentation.
 
 a.            CONTROL BY
PRINCIPAL STOCKHOLDERS
 
 The
Chairman /Founder/Chief Executive Officer/Julianna Lu owns beneficially and in
the aggregate, the majority of the voting power of the outstanding shares of the
common stock of the Company. Accordingly, the chief executive officer has the
ability to control the approval of most corporate actions, including increasing
the authorized capital stock of the Company and the dissolution, merger or sale
of the Company's assets or business.
  F-7
  2.            Basis
of presentation
 
 These
condensed annual consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America (“US GAAP”).
 
 The
annual results of operations are not necessarily indicative of the results to be
expected for the fiscal year ending December 31, 2008. The Company’s financial
statements contained herein are unaudited and, in the opinion of management,
contain all adjustments (consisting only of normal recurring accruals) necessary
for a fair presentation of financial position, results of operations and cash
flows for the periods presented. The Company’s accounting policies and certain
other disclosures are set forth in the notes to the consolidated annual audit
financial statements contained in the Company’s Annual Report on Form 10-K for
the year ending December 31, 2008.  These financial statements should
be read in conjunction with the Company’s audited consolidated financial
statements and notes thereto. The preparation of financial statements in
conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
  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
accumulateddeficit
of $16,797,449 and a stockholders’deficit
of $1,315,736 as December 31, 2007and 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.
 China
Holdings is a development stage company as described by Statements of the
Financial Accounting Standards Board No. 7 (“SFAS 7.”) SFAS 7 states that a
business is considered to be in the development stage if it is devoting
substantially all of its efforts to establishing a new business and either of
the following conditions exists:
 
 1.        Planned principal operations have not
commenced.
 2.        Planned operations have commenced, but
there has been no significant revenue there from.
  The
Company’s management believes the Company is a development stage entity as it is
in the process of attempting to acquire assets, namely that of potential both
identified and currently unidentified merger candidates, and is also exploring
various forms of financing and capital structures in order to facilitate future
acquisitions. The Company has considered SFAS 7 and has determined April 3,
2002, the inception date, to be the inception date of the development
stage.
  The
Company will depend almost exclusively on outside capital to complete the
development of its intellectual property, completion of its proposed projects
and marketing of its projects. Such outside capital will include advances from
the majority shareholder, proceeds from the sale of the company's common stock
or preferred stock and may include borrowing from banks. 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.
  F-8
  The
issuances of additional equity securities by the Company may result in a
significant dilution in the equity interests of its current stockholders.
Obtaining bank loans, assuming those loans would be available, will
increase the Company's liabilities and future cash commitments.
 
 a            Consolidation
  The
unaudited 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.
 
 b            Reclassifications
 
 Certain
reclassifications to the Company’s balance sheet and income statement have been
made in 2008, in order for the 2009 financial statements to conform to the
presentation of these financial statements.  These reclassifications did
not impact the Company’s total assets, total liabilities, net loss or
stockholders deficit for the twelve (12) months ended December 31, 2008 and
2007, respectively.
 
 c             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
 
 d             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.
 
 e            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.
 
 f            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.
  F-9
  g            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.
 
 h             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, 2008, a full deferred tax asset valuation allowance has been provided and no
deferred tax asset benefit has been recorded.
 
 i             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
the years 2008 and 2007, the Company granted 70,322,247 and nil options,
respectively to employees and consultants that were accounted for pursuant to
SFAS No. 123(R) and 123, respectively.
  During
the years 2008 and 2007, the Company granted nil and 45,000,000 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.
 
 j             Property, Plant
and Equipment
 
 Property,
plant and equipment are recorded at cost and depreciated on a straight line
basis over their estimated useful lives of three to forty years. Maintenance and
repairs are charged to expense as incurred. Significant renewals and
improvements are capitalized.
  F-10
  k             Acquisitions
 
 We
account for acquisitions using the purchase method of accounting in accordance
with the provisions of SFAS No. 141. In each of our acquisitions for the periods
presented, we determined that fair values were equivalent to the acquired
historical carrying costs.
 
 l             Comprehensive
Income
 
 We follow
Statement of Financial Accounting Standards No. 130 (SFAS 130) “Reporting Comprehensive
Income” to recognize the elements of comprehensive income. Comprehensive
income is comprised of net income and all changes to the statements of
stockholders’ equity, except those due to investments by stockholders, changes
in paid-in capital and distributions to stockholders. Comprehensive income
for  the year s ended as  December31, 2008 & 2007
included net income, foreign currency translation adjustments, unrealized gains
or losses on marketable securities available for sale, net of income taxes, and
unrealized gains or losses on marketable securities available for sale-related
party, net of income taxes.
 
 m             Foreign Currency
Translation
 
 The
accompanying consolidated financial statements are presented in United States
dollars. The functional currency of our Chinese subsidiaries is the Renminbi,
the official currency of the People’s Republic of China, (“RMB”). Capital
accounts of the consolidated financial statements are translated into United
States dollars from RMB at their historical exchange rates when the capital
transactions occurred. Assets and liabilities are translated at the exchange
rates as of the balance sheet date. Income and expenditures are translated at
the average exchange rates for the year s ended as  December31, 2008
& 2007.
 
 The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through PRC authorized institutions. No
representation is made that the RMB amounts could have been, or could be,
converted into United States dollars at the rates applied in the
translation.
 
 n             Impairment of
Long-Lived Assets
 
 In
accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, we periodically review our long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be fully recoverable. We recognize an
impairment loss when the sum of expected undiscounted future cash flows is less
than the carrying amount of the asset. The amount of impairment is measured as
the difference between the estimated fair value and the book value of the
underlying asset. We did not record any impairment charges during the year s
ended as  December31, 2008 & 2007.
 
 o             Subsidiaries Held
for Sale
 
 Long-lived
assets are classified as held for sale when certain criteria are met. These
criteria include management’s commitment to a plan to sell the assets; the
availability of the assets for immediate sale in their present condition; an
active program to locate buyers and other actions to sell the assets has been
initiated; the sale of the assets is probable and their transfer is expected to
qualify for recognition as a completed sale within one year; the assets are
being marketed at reasonable prices in relation to their fair value; and it is
unlikely that significant changes will be made to the plan to sell the assets.
We measure long-lived assets to be disposed of by sale at the lower of carrying
amount or fair value, less cost to sell. See Note 14, “Subsidiaries Held
for Sale,” for further information.
 
 p             Minority
Interest
 
 Under
generally accepted accounting principles when losses applicable to the minority
interest in a subsidiary exceed the minority interest in the equity capital of
the subsidiary, the excess is not charged to the majority interest since there
is no obligation of the minority interest to make good on such losses. We,
therefore, absorbed all losses applicable to a minority interest where
applicable. If future earnings do materialize, we shall be credited to the
extent of such losses previously absorbed.
  F-11
  q             Basic and Diluted
Earnings per Share
 
 Basic
income per common share is computed by dividing income available to common
shareholders by the weighted average number of shares of common stock
outstanding for the periods presented. Diluted income per share reflects the
potential dilution that could occur if securities were exercised or converted
into common stock or other contracts to issue common stock resulted in the
issuance of common stock that would then share in our income, subject to
anti-dilution limitations.
 
 r             Revenue
Recognition
 
 We follow
the guidance of the Securities and Exchange Commission's Staff Accounting
Bulletin (“SAB”) No. 104 and SAB Topic 13 for revenue recognition. In general,
we record revenue when persuasive evidence of an arrangement exists, services
have been rendered or product delivery has occurred, the sales price to the
customer is fixed or determinable, and collectability is reasonably
assured.
 
 j            Recent
accounting pronouncements
  In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities-including an amendment of FAS 115 ”.
SFAS 159 allows entities to choose, at specified election dates, to measure
eligible financial assets and liabilities at fair value that are not otherwise
required to be measured at fair value. If a company elects the fair value option
for an eligible item, changes in that item’s fair value in subsequent reporting
periods must be recognized in current earnings. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. SFAS 159 had no impact on our financial
statements as of September 30, 2008, and we will continue to evaluate the
impact, if any, of SFAS 159 on our financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations"
("SFAS 141No. (R),") which replaces SFAS No. 141, "Business Combinations" ("SFAS
No. 141"). SFAS No. 141(R) retains the underlying concepts of
SFAS 141 in that all business combinations are still required to be
accounted for at fair value under the acquisition method of accounting but SFAS
No. 141(R) changed the method of applying the acquisition method in a
number of significant aspects. Acquisition costs will generally be expensed as
incurred; non-controlling interests will be valued at fair value at the
acquisition date; in-process research and development will be recorded at fair
value as an indefinite-lived intangible asset at the acquisition date;
restructuring costs associated with a business combination will generally be
expensed subsequent to the acquisition date; and changes in deferred tax asset
valuation allowances and income tax uncertainties after the acquisition date
generally will affect income tax expense. SFAS No. 141(R) is effective on a
prospective basis for all business combinations for which the acquisition date
is on or after the beginning of the first annual period subsequent to
December 15, 2008, with the exception of the accounting for valuation
allowances on deferred taxes and acquired tax contingencies. SFAS
No. 141(R) amends SFAS No. 109, "Accounting for Income Taxes," such
that adjustments made to valuation allowances on deferred taxes and acquired tax
contingencies associated with acquisitions that closed prior to the effective
date of SFAS No. 141(R) would also apply the provisions of SFAS
No. 141(R). Early adoption is not permitted. The Company does not expect
the adoption of SFAS No. 141(R) to have a material effect on its
consolidated financial position or results of operations.
  In
December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in
Consolidated Financial Statements." SFAS No. 160 amends Accounting
Research Bulletin No. 51, "Consolidated Financial
Statements" and requires (i) classification of non-controlling
interests, commonly referred to as minority interests, within stockholders'
equity, (ii) net income to include the net income attributable to the
non-controlling interest and (iii) enhanced disclosure of activity related
to non-controlling interests. SFAS No. 160 is effective for fiscal years
beginning after December 15, 2008. The Company does not expect the adoption
of SFAS No. 160 will have a material effect on its consolidated financial
statements.
  F-12
  In
February 2008, the Financial Accounting Standards Board ("FASB") issued FSP No.
SFAS 157-2, which delays the effective date of SFAS No. 157, "Fair Value Measurements," for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). Nonfinancial assets and nonfinancial liabilities
would include all assets and liabilities other than those meeting the definition
of a financial asset or financial liability as defined in paragraph 6 of
SFAS No. 159, "The Fair
Value Option for Financial Assets and Financial Liabilities." This FASB
Staff Position defers the effective date of Statement 157 to fiscal years
beginning after November 15, 2008, and interim periods within those fiscal
years for items within the scope of FSP No. SFAS 157-2. We are currently
evaluating the effects, if any, that FSP No. SFAS 157-2 may have on our
consolidated financial statements.
  In April
2008, the FASB issued FASB Staff Position 142-3, Determination of the Useful Lives of
Intangible Assets ("FSP 142-3"), which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB No. 142, Goodwill and Other Intangible
Assets. The intent of FSP 142-3 is to improve the consistency between the
useful life of a recognized intangible asset under SFAS No. 142 and the
period of expected cash flows used to measure the fair value of the asset under
SFAS No. 141(R) and other U.S. generally accepted accounting principles.
FSP No. 142-3 is effective for fiscal years beginning after
December 15, 2008. The Company does not expect the adoption of FSP
No. 142-3 to have a material effect on the consolidated financial
statements.
  In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" ("SFAS 162"). SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting
principles. SFAS 162 is effective 60 days following the Securities and
Exchange Commission's approval of the Public Company Accounting Oversight Board
Auditing amendments to AU Section 411, "The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles." The adoption of this
statement will not have an impact on the Company's consolidated financial
statements.
  In
October 2008, the FASB, issued FSP No. SFAS 157-3 ("FSP 157-3"), "Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active." FSP 157-3
clarifies the application of SFAS No. 157, "Fair Value Measurements," in a
market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. FSP157-3 is effective
immediately, including prior periods for which financial statements have not
been issued. The Company has adopted FSP 157-3 effective with the financial
statements ended November 1, 2008. The adoption of this
statement will not have an impact on the Company's consolidated financial
statements.
 
 3.            TANGIBLE ASSETS
 
 a.            Land /Assets  purchase
agreements
 
 800 Square Kilometers of
Land for Real Estate Development in Inner Mongolia, PR China
 
 On
February 28, 2009,  China Holdings, Inc. (the “Company”) has legally
secured a Land Acquisition & Development, Land Right & Ownership
Contract ("the Contract") with local municipal government, Inner Mongolia, P.R.
China to exclusively acquire and develop a total of  800 Million
Square Meters of  Lands (Residential, Commercial, Industrial and
Recreation Lands) at the fixed prices of : 1) 100 Million Square Meters (City
Centre) Lands at 58,000 Yuan (China Currency) per mu (1 Mu = 667 Square Meters),
and 2). Additional 700 Million Square Meters at 100,000 Yuan per mu. The
Contract allows the Company to acquire all or part of the 800 Million Square
Meters of Lands (Residential, Commercial, Industrial and Recreation Lands) in
the next seven (7) years exclusively with non-competition & non-solicit
legal protection for the local inner Mongolia government
  F-13
  China
Holdings focuses on 800 Square Kilometers of Land for Real Estate Development in
Inner Mongolia, PR China in 2009 – 2016. The multi-billion dollar value inherent
in the China Holdings’ unique position of The Land Acquisition &
Development, Land Right & Ownership for the 800 Square KM (“Kilometres”)
Lands of Residential, Commercial, Industrial and Recreation Lands in Inner
Mongolia PR China are truly extraordinary with multi-billions dollars
values,  and the progress the Company has made on its initiatives for
the coming years signals the ability to capitalize on the underlying potential
multi-billions dollars assets & profits of land /real estate/properties
development in Inner Mongolia, China.
 
 China
Holdings, Inc.’s Ultimate Master Plan – Phase I - will consist of 100 Square
Kilometers of land in Inner Mongolia, PR China. The Company’s objective is
maximizing the value of every square meter of land to China Holdings &
shareholders’ ultimate benefit/value, and the New City in Inner Mongolia PR
China. The master plan will be not only exciting but a presentation package that
will assist China Holdings’ further worldwide selling partial of 100 Square KM
land parcels to the top international developers at ultimate values: with
multi-billion dollars assets & revenues.The New “China-Las Vegas” City which
China Holdings is developing now in Inner Mongolia PR China will generate
multi-billion dollars revenues & assets annually in 1- 20 years like US Las
Vegas City in 2006 – 2007 and will provide as A New World-“China-Las Vegas”
City  in China to the World.
 
 China Power,
Inc.
 400 Square Kilometers Land
for 2000 Megawatts Wind Power Plants  Developme
 
 OnNovember 26, 2008, China Holdings,
Inc. and its’ controlled subsidiary: China Power, Inc. ( together (
“ the Company”) has already executed A Land Acquisition, Land Right &
Ownership Agreement (“ the Agreement”) with local municipal government in Inner
Mongolia, P.R. China to exclusively acquire a total of 400 Square KM of Industrial
lands at a fixed price of 58,000 Yuan ( China Currency) Per Mu Lands ( 1 Mu =
667 Square Meters) with non-competition & non-solicit protections from the
local government. The Agreement allows the Company to acquire all or part of
the 400 Square KM
of Industrial lands in next four years exclusively. The Agreement also allows
the Company to apply for partial Lands
RE-ZONING into Residential Lands
or/and Commercial Lands for further Lands Development. China Holdings,
Inc. (the “Company”)’s controlled subsidiary: China Power, Inc. focuses on its
developing and construction of 2000 Megawatts Wind Power Plants/Projects on this
400 Square Kilometers lands in Inner Mongolia, PR China in 2009 –
2013.
 
 The
Company has not recorded the tangible assets of the total 12,000 Sq KM
lands/assets & the proprietary rights as fair-valued tangible assets yet as
the year ending as December 31 2008, but will record the 12,000 Square KM
lands/assets & the proprietary rights as fair-valued tangible assets after
further Valuation for the Company’s 12,000 Square KM lands/assets/& the
proprietary rights as fair-valued tangible assets  in the Company’s
2nd
Quarter ending in 2009 Financial Statement/SEC Form 10Q in August,
2009.
 
 b.            Renewable
Energy Power Plants/Assets purchase agreements
 
 2000 Megawatts Wind Power
Plants/Projects  Assets purchase agreements
 
 In September, 2008, China
Holdings, Inc. and its controlled subsidiary, China Power Inc. have secured
exclusive rights/agreements with local government in Inner Mongolia China to
exclusively develop and construct Wind Power Plants to generate
2,000 MW (“Megawatts”)
of electricity on a total 400
Square KM land with non-competition & non-solicit protections from
the local government. Under the China Renewable Energy Laws and
Registrations, the China State Power Grid has guaranteed to purchase 100% of the
power generated by China Power,
Inc.’s Wind Power Plants (2,000 MW) at 0.55 Yuan per kilowatt hour or
approximately $0.08 per kilowatt hour, with a 4% increase annually for 25 years
with additional guaranteed extension terms. China Power expects total gross
revenue of 2,750 Million Yuan (2,000,000 Kilowatts x 2500 Hours x 0.55 Yuan/Kwh)
in 4 -5 years upon 2,000 MW Wind Farm Power Plants in full
production.
  F-14
  The value
inherent in China Power's unique position through its 2000 MW Wind Power
Plants/Projects is truly extraordinary, and the progress the China Power has
made on its initiatives for the coming years signals the ability to capitalize
on the underlying potential of renewable energy power plants & industry in
China, or/and worldwide.
 
 250 Megawatts Bomass Power
Plants/Projects  Assets purchase agreements
 
 The
Company, via its controlled 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.
 
 The
Company, via its controlled owned subsidiary: China Power will
consolidate/develop its construction plan/execution  on its five 50 MW
biomass power plants, for a total of 250 MW in Hebei, Hunan, AnHui and Inner
Mongolia Provinces, PR China in 2009-2013. China Power has completed two (2)
Biomass Plants/projects’feasibility studies in 2008 via: China Electric &
Design Institute, owned/controlled by China National Mechanical & Industrial
Minister (“CEI”) (China-National-Top-Rank (6) Engineering Firm). However, due to
current world economy crisis, China Power & CEI expect to reduce 20%-30%
total construction cost from 600 millions RMB down to 400 millions RMB for each
50 MW biomass plants/projects. China Power have also completed three (3) fuel
analysis completed for three biomass plants/projects. China Power expects to
break ground on the biomass projects in 2009, with completion in 24 to 36
months. Under China Renewable Energy Laws and Registrations, the China State
Power Grid has agreed to purchase 100% of the electricity power generated by the
company’s five biomass power plants at 0.60 Yuan per kilowatt hour or
approximately $0.088 per kilowatt hour, with a 4% annual increase for 25 years,
and additional guaranteed extension terms. China Power expects to reach a total
of gross revenue: 900 millions RMB = 5 x 50,000 KW x 6000 Hours x 0.60 Yuan in 4
-5 years upon 250 MW -5 Biomass  Power Plants in full production. The
net income is estimated as 45% of the total gross revenue.
 
 The
Company has not recorded the tangible assets of
thetotal 2250 Megawatts Renewable Power Plants/ Assets
purchaseas
fair-valued tangible assets yet as the year ending as December 31 2008, but will
record the recorded  the total 2250 Megawatts Renewable Power Plants/ Assetsas fair-valued tangible assets after further Valuations on the Company’s
2250 Megawatts Renewable Energy Power Plants/Projects/Assets
Valuation  in the Company’s 2nd Quarter
ending in 2009 Financial Statement/SEC Form 10Q in August, 2009.
 
 c.            PROPERTY AND
EQUIPMENT
  December 31,2008
                          
                          
                          2007Computer
      Equipment
                          
                          $
                          20,846
                          
                          
                          $
                          20,846Furniture
      & Fixtures
                          
                          
                          3,392
                          
                          
                          
                          3,392Less:
      accumulated depreciation
                          
                          
                          (16,102
                          )
                          
                          
                          (12,616
                          )$
                          8,135
                          
                          
                          $
                          11,622
  F-15
  Depreciation
expense amounted to $3,448 and $4,262 for the years ended December 31, 2008 and
2007, respectively.
 
 4.            INTANGIBLE
ASSETS
 a.            Pharmaceutical
Assets  purchase agreements
 
 Pursuant
to an asset purchase agreement dated May 1, 2004, the Company acquired from the
Company’s President, who is a majority shareholder, proprietary rights
and formulas to the 26 natural herbal medicinal products that comprise the King
of Herbs and Taoist Medicine product lines. The Company recorded the cost of the
proprietary rights and formulas as intangible assets at the historical cost
basis of $1. The excess of the purchase price over the historical cost basis of
the intangible assets of $366,306 was expensed as research and development
costs during the year ended December 31, 2004.
 
 Pursuant
to an asset purchase agreement dated March 22, 2005, the Company acquired from
the Company’s shareholders intellectual property rights to 108 “100%
Natural Taoist Herbal Medicinal Products”. The Company has recorded the cost
basis of these property rights at the historical cost basis of the shareholders
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 2005.
  b.            Nutraceuticals Products Licensing
rights agreement
  During
the fiscal year 2004, the Company entered into various agreements with Hotway
Nutraceuticals Canada Co., Ltd. (“Hotway”), a British Columbia company. The
intangible assets acquired from Hotway were written down to $1 during
2004.
 
 5.            Unregistered
Sales of Equity Securities TO MAJOR SHAREHOLDERS
  On March
12, 2006, China Health Holdings, Inc (the "Company") agreed to issue 5,000,000
shares of the Company's common stock to Julianna Lu, the Company's Founder and
Chief Executive Officer/Chairpersom, as consideration for the forgiveness of
loans in the aggregate amount of USD$300,000 previously advanced to the Company
by Ms. Lu. As additional consideration, the Company agreed to issue to Ms. Lu,
five year warrants to purchase 10,000,000 shares of the Company's common stock,
exercisable at a price of $.10 and ten year warrants to purchase 10,000,000
shares of the Company's common stock exercisable at a price of $.20. The
warrants have piggy back registration rights with respect to the shares of
common stock issuable upon exercise of the warrants. Upon exercise of the
warrants and payment of the applicable exercise price, the shares of common
stock shall be fully paid and non-assessable and shall have the same rights,
including voting rights, as other shares of common stock of the Company. The
Company claims an exemption from the registration requirements of the Securities
Act of 1933, as amended (the "Act") with respect to the foregoing, pursuant to
Section 4(2) of the Act and/or Regulation D promulgated
thereunder.
 
 On
October 12, 2006, China Health Holdings, Inc (the "Company") agreed to issue
10,000,000 shares of the Company's common stock to Julianna Lu, the Company's
Founder and Chief Executive Officer, as consideration for the forgiveness of
loans in the aggregate amount of USD $300,000 previously advanced to the Company
by Ms. Lu. As additional consideration, the Company agreed to issue to Ms. Lu,
five year warrants to purchase 10,000,000 shares of the Company's common stock,
exercisable at a price of $.10 and ten year warrants to purchase 10,000,000
shares of the Company's common stock exercisable at a price of $.20.  The
warrants have piggy back registration rights with respect to the shares of
common stock issuable upon exercise of the warrants. The Company claims an
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Act") with respect to the foregoing, pursuant to Section 4(2) of
the Act and/or Regulation D promulgated thereunder.
  F-16
  On  December
22, 2005, the Board of Directors of the Company approved the issuance of
1,000,000 shares Series A Preferred Stock issued to Julianna Lu at a price of
$0.15 in consideration for the forgiveness of a loan to the Corporation in the
aggregate amount of one hundred and fifty thousand (USD$150,000), subject to the
filing of the Certificate of Designation with the State of Nevada.  These
shares were issued pursuant to the exemption from registration provided by
Section 4(2) under the Securities Act of 1933.  On February 21, 2006, the
"Company" filed a Certificate of Designation, Powers Preferences and Rights of
Series A Preferred Stock with the state of Nevada.  Of the Company's
20,000,000 shares of authorized preferred stock, the Certificate of Designation
authorizes the Company to issue up to 1,000,000 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 the Company's 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 shareholders of the Company 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, etc.
  6.            DUE TO MAJOR
SHAREHOLDERS
 
 The Company has received
advances/funds/loansfrom twomajorshareholders which bear interest at 10%
per annum with no specific repayment terms. The tables below
detail transactions during
the twlevemonths endedDecember 31, 2008. The amounts outstanding loan were
$2,085,508 as at December 31 2008  (2007 - $1,271,932) which are due
to Julianna Lu, the Company’s CEO/Founder/Chairwoman for a total of $1,630,489
(2007 - $974,447) and also due to Xiaofei Yu, the Company’s Vice Chairman
foror a total of $455,018($297,484).Accrued interest expense to directors
and shareholders for the Years ended December 31, 2008 and 2007 was $171,311 and
$102,032, respectively.
 
 The table
below details transactions related to the loan payable to the Company's
Chairman, Founder and Chief Executive Officer/Julianna Lu during the year ended
December 31, 2008:
 
 Beginning
      balance payable, December 31, 2007
                      
                      $
                      974,448Accrued
      management fees
                      
                      
                      360,000Accrued
      interest
                      
                      
                      133,776Advances
      from Chief Executive Officer
                      
                      
                      162,266Ending
      balance payable, December 31, 2008
                      
                      $
                      1,630,489
  The table
below details transactions related to the loan payable to the Company's Vice
Chairman/Xiaofei Yu during the year ended December 31, 2008:
  Beginning
      balance payable, December 31, 2007
                          
                          $
                          297,484Accrued
      management fees
                          
                          
                          120,000Accrued
      interest
                          
                          
                          37,354Advances
      from Vice Chairman
                          
                          
                          -Ending
      balance payable, December 31, 2008
                          
                          $
                          455,018
  F-17
  7.            CAPITAL STOCK
 
 Treasure
Position
 
 The total
authorized capital of the Company consists of 2,000,000,000 voting common shares
with a $0.001 par value and 20,000,000 preferred shares with a $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 February 22, 2008, the Company
increased the authorized common shares from 300,000,000 shares to 2,000,000,000
shares.
  Preferred Stocks
Issued
 
 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.
 
 On  February  28,  2006,
the Company agreed to issue up to 250,000 shares of Series A preferred stock
with a par value of $0.001 per share to Julianna Lu as legally  the
Company declared  & issued a stock dividend of one share of common
stock for every share four shares of common  stock held
by  shareholders  of record at the close of business on
February 28, 2006
 
 25% Stocks Dividends Issued
to Shareholders on February 28, 2006
 
 On  February  28,  2006,  the
Company  issued a press  release & legally filed with
SEC Form 8-K for  announcing  that the Company
has  declared a stock dividend of one share of common stock for every
share four shares of common  stock held
by  shareholders  of record at the close of business on
February 28, 2006. Stock certificates have been mailed to all shareholders
without further action on their part on or about March 17, 2006. Fractional
shares resulting from the stock dividend will be rounded down to the nearest
share. The information in Item 8.01 of this
report  regarding  the foregoing  press release
shall not be deemed  "filed" for
purposes  of  Section 18 of
the  Securities  Exchange  Act of 1934
or  otherwise subject to the liabilities of that
section,  nor shall it be deemed incorporated by reference in any
filing under the  Securities  Act of 1933 or
the  Securities Exchange  Act of 1934,  except as
expressly  set forth by specific  reference in such a
filing.
 
 Year Ended December 31,
2008:
 
 As
of  December 31, 2008, the Company had a total of 186,600,000
outstanding shares of Common Stock , and 1,250,000 shares of Series “A”
Preferred Stock, and 77,173,669 outstanding and issued of Common Stock Option,
and 69,900,000 outstanding and issued of Common Stock Warrants.
 
 During
the period ended December 31, 2008, the Company issued a total of 5,992,940
common shares for services at an average of $0.03 per share for a total
consideration of $179,041.
 
 On
January 23, 2008, the Company issued 4,000,000 shares of common stock with a
fair value of $.03 per share for consulting services; $120,000 is included in
consulting services for 2008.
  On
February 12, 2008 the Company issued 400,000 shares of common stock with a fair
value of $.04 per share for consulting services.  The shares were
issued in the amounts of 200,000 equally to two individuals, one of which was a
director of the Company; $16,000 is included in consulting services for
2008.
 
 On April
28, 2008, the Company reinstated 875,000 shares of common stock with a fair
value of $.04 per share, which were previously cancelled on December 31, 2006;
$35,000 is included in investor relation services for 2008.
 
 On April
28, 2008, the Company issued 717,940 shares of common stock with a fair value of
$.011 per share for office rent; $8,041 is included in rent expense for
2008.
  F-18
  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.
  ·
              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.
  8.                 STOCK OPTIONS AND STOCK
WARRANTS
 
 a.                 STOCK OPTIONS
 
 The
Company periodically grants stock options to provide incentive to employees,
officers, and consultants, with resolution and approval from the Board of
Directors. All issuances vest immediately and have varying expiration timelines.
As at December 31, 2008 and 2007, there were 77,173,669 and 10,351,422 of the
outstanding options which were exercisable, respectively.
  To
calculate the stock-based compensation under SFAS 123R, the Company used the
Black-Scholes option-pricing model. The Company’s determination of fair value of
option-based awards on the date of grant using the Black-Scholes model is
affected by the Company’s stock price as well as assumptions regarding a number
of subjective variables. These variables include, but are not limited to, the
Company’s expected stock price volatility over the term of the awards, risk-free
interest rate, and the expected life of the options. The risk-free interest rate
is based on a treasury instrument whose term is consistent with the expected
life of the stock options. The expected volatility, holding period, and
forfeitures of options are based on historical experience.
  In 2008
the Company granted 70,322,247 options (2007 – nil) to employees and consultants
that were accounted for pursuant to SFAS No. 123(R) and 123. The
weighted-average fair value per stock option granted in 2008  was
$0.017 (2007 – $nil). The fair value of the options granted in 2008 was recorded
at $1,215,729 using a Black-Scholes model with the following weighted average
assumptions: no dividend yield, expected volatility of 284%, risk-free interest
rate of 4.85% and an expected life of 8.45 years.
  F-19
  The
following table summarizes all stock options granted, exercised and expired in
the years ended December 31, 2007 and 2008:
 
 Shares
      underlying Options
                                      
                                      
                                      WeightedAverageExercise PriceOutstanding
      as of December 31, 2007
                                      
                                      
                                      10,351,422
                                      
                                      
                                      $
                                      0.17Granted
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Exercised
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Expired
      or cancelled
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Outstanding
      as of December 31, 2006
                                      
                                      
                                      10,351,422
                                      
                                      
                                      $
                                      0.17Granted
                                      
                                      
                                      70,322,247
                                      
                                      
                                      
                                      0.02Exercised
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Expired
      or cancelled
                                      
                                      
                                      (3,500,000
                                      )
                                      
                                      
                                      0.18Outstanding
      as of December 31, 2008
                                      
                                      
                                      77,173,669
                                      
                                      
                                      $
                                      0.03
  The
following table summarizes information concerning currently outstanding stock
options as at December 31, 2008.
  ExercisePrice
                                                                        
                                                                        OptionsOutstandingDecember 31,2008
                                                                        
                                                                        
                                                                        Weighted AverageRemaining Life inYears
                                                                        
                                                                        
                                                                        OptionsExercisable atDecember 31,2008$
                                                                        0.100
                                                                        
                                                                        
                                                                        2,500,000
                                                                        
                                                                        
                                                                        
                                                                        0.42
                                                                        
                                                                        
                                                                        
                                                                        2,500,000$
                                                                        0.100
                                                                        
                                                                        
                                                                        251,422
                                                                        
                                                                        
                                                                        
                                                                        0.46
                                                                        
                                                                        
                                                                        
                                                                        251,422$
                                                                        0.300
                                                                        
                                                                        
                                                                        600,000
                                                                        
                                                                        
                                                                        
                                                                        0.46
                                                                        
                                                                        
                                                                        
                                                                        600,000$
                                                                        0.200
                                                                        
                                                                        
                                                                        2,500,000
                                                                        
                                                                        
                                                                        
                                                                        2.00
                                                                        
                                                                        
                                                                        
                                                                        2,500,000$
                                                                        0.200
                                                                        
                                                                        
                                                                        1,000,000
                                                                        
                                                                        
                                                                        
                                                                        0.10
                                                                        
                                                                        
                                                                        
                                                                        1,000,000$
                                                                        0.100
                                                                        
                                                                        
                                                                        3,000,000
                                                                        
                                                                        
                                                                        
                                                                        0.00
                                                                        
                                                                        
                                                                        
                                                                        3,000,000$
                                                                        0.500
                                                                        
                                                                        
                                                                        3,000,000
                                                                        
                                                                        
                                                                        
                                                                        0.92
                                                                        
                                                                        
                                                                        
                                                                        3,000,000$
                                                                        0.100
                                                                        
                                                                        
                                                                        3,000,000
                                                                        
                                                                        
                                                                        
                                                                        1.43
                                                                        
                                                                        
                                                                        
                                                                        3,000,000$
                                                                        0.029
                                                                        
                                                                        
                                                                        16,000,000
                                                                        
                                                                        
                                                                        
                                                                        9.42
                                                                        
                                                                        
                                                                        
                                                                        16,000,000$
                                                                        0.025
                                                                        
                                                                        
                                                                        9,000,000
                                                                        
                                                                        
                                                                        
                                                                        9.47
                                                                        
                                                                        
                                                                        
                                                                        9,000,000$
                                                                        0.100
                                                                        
                                                                        
                                                                        1,000,000
                                                                        
                                                                        
                                                                        
                                                                        0.74
                                                                        
                                                                        
                                                                        
                                                                        1,000,000$
                                                                        0.200
                                                                        
                                                                        
                                                                        1,000,000
                                                                        
                                                                        
                                                                        
                                                                        1.74
                                                                        
                                                                        
                                                                        
                                                                        1,000,000$
                                                                        0.500
                                                                        
                                                                        
                                                                        1,000,000
                                                                        
                                                                        
                                                                        
                                                                        1.74
                                                                        
                                                                        
                                                                        
                                                                        1,000,000$
                                                                        0.100
                                                                        
                                                                        
                                                                        322,247
                                                                        
                                                                        
                                                                        
                                                                        1.74
                                                                        
                                                                        
                                                                        
                                                                        322,247$
                                                                        0.011
                                                                        
                                                                        
                                                                        33,000,000
                                                                        
                                                                        
                                                                        
                                                                        9.74
                                                                        
                                                                        
                                                                        
                                                                        33,000,000$
                                                                        0.030
                                                                        
                                                                        
                                                                        77,173,669
                                                                        
                                                                        
                                                                        
                                                                        7.46
                                                                        
                                                                        
                                                                        
                                                                        77,173,669
 
 A summary
of the 70,322, 247 stock options granted during the year ended December 31, 2008
are listed below:
  F-20
  On May
29, 2008 the Company granted 3,000,000 stock options to an investor relations
firm with an exercise price of $0.10 per share which expire January 1,
2009.
 
 On May
29, 2008 the Company granted 3,000,000 stock options to an investor relations
firm with an exercise price of $0.50 per share which expire December 1,
2009.
 
 On June
2, 2008 the Company granted 6,000,000 stock options to a director of the Company
with an exercise price of $0.029 per share for a period of ten
years.
 
 On June
2, 2008 the Company granted 10,000,000 stock options to a director of the
Company with an exercise price of $0.029 per share for a period of ten
years.
 
 On June
5, 2008 the Company granted 2,000,000 stock options to a management consultant
to the Company with an exercise price of $0.10 per share for a period of two
years.
 
 On June
5, 2008 the Company granted 1,000,000 stock options to a management consultant
of the Company with an exercise price of $0.10 per share for a period of two
years.
 
 On June
20, 2008 the Company granted 6,000,000 stock options to a director of the
Company with an exercise price of $0.025 per share for a period of ten
years.
 
 On June
20, 2008 the Company granted 3,000,000 stock options to a consultant of the
Company with an exercise price of $0.025 per share for a period of ten
years.
 
 On
September 26, 2008 the Company granted 3,000,000 stock options to an investor
relations consultant of the Company.  The options are segregated in
three equal denominations of 1,000,000, and three separate exercise prices of
$0.10, $0.20 and $0.50 with respective expiry terms of one year, two years and
two years accordingly.
 
 On
September 26, 2008 the Company granted 322,247 stock options to an IT consultant
of the Company with an exercise price of $0.10 per share for a period of two
years.
 
 On
September 26, 2008 the Company granted 10,000,000 stock options to an energy
consultant of the Company with an exercise price of $0.0112 per share for a
period of ten years.
 
 On
September 26, 2008 the Company granted 17,000,000 stock options to a director of
the Company with an exercise price of $0.0112 per share for a period of ten
years.
 
 On
September 26, 2008 the Company granted 6,000,000 stock options to a director of
the Company with an exercise price of $0.0112 per share for a period of ten
years.
 
 b.                 STOCK WARRANTS
 
 The
Company periodically grants warrants to non-employees for various services and
remuneration arrangements, with resolution and approval from the Board of
Directors. All issuances vest immediately and have varying expiration timelines.
As at December 31, 2008 and 2007, there were 69,900,000 and 74,650,000 of the
outstanding warrants which were exercisable, respectively.
  To
calculate the stock-based compensation under SFAS 123R, the Company used the
Black-Scholes pricing model. The Company’s determination of fair value of
option-based awards on the date of grant using the Black-Scholes model is
affected by the Company’s stock price as well as assumptions regarding a number
of subjective variables. These variables include, but are not limited to, the
Company’s expected stock price volatility over the term of the awards, risk-free
interest rate, and the expected life of the options. The risk-free interest rate
is based on a treasury instrument whose term is consistent with the expected
life of the stock options. The expected volatility, holding period, and
forfeitures of options are based on historical experience.
  F-21
  In 2008
the Company granted nil options (2007 – 45,000,000) to consultants that were
accounted for pursuant to SFAS No. 123(R) and 123. The weighted-average fair
value per warrant issued in 2007 were  $0.064 (2008 – $nil). The fair
value of the warrants granted in 2007 was recorded at $2,873,277 using a
Black-Scholes model with the following weighted average assumptions: no dividend
yield, expected volatility of 301%, risk-free interest rate of 4.85% and an
expected life of 5 years.
 
 The
following table summarizes all warrants granted, exercised and expired in the
years ended December 31, 2007 and 2008:
  Shares
      underlying Warrants
                                  
                                  
                                  WeightedAverageExercise PriceOutstanding
      as of December 31, 2007
                                  
                                  
                                  31,750,000
                                  
                                  
                                  $
                                  0.15Granted
                                  
                                  
                                  45,000,000
                                  
                                  
                                  
                                  0.21Exercised
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Expired
      or cancelled
                                  
                                  
                                  (2,100,000
                                  )
                                  
                                  
                                  0.15Outstanding
      as of December 31, 2006
                                  
                                  
                                  74,650,000
                                  
                                  
                                  $
                                  0.19Granted
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Exercised
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Expired
      or cancelled
                                  
                                  
                                  (4,750,000
                                  )
                                  
                                  
                                  0.18Outstanding
      as of December 31, 2008
                                  
                                  
                                  69,900,000
                                  
                                  
                                  $
                                  0.19
 
 The
following table summarizes information concerning currently outstanding warrants
as at December 31, 2008.
  ExercisePrice
                                                        
                                                        WarrantsOutstandingDecember 31,2008
                                                        
                                                        
                                                        Weighted AverageRemaining Lifein Years
                                                        
                                                        
                                                        WarrantsExercisable atDecember 31,2008$
                                                        0.10
                                                        
                                                        
                                                        20,000,000
                                                        
                                                        
                                                        
                                                        2.81
                                                        
                                                        
                                                        
                                                        20,000,000$
                                                        0.20
                                                        
                                                        
                                                        37,900,000
                                                        
                                                        
                                                        
                                                        4.78
                                                        
                                                        
                                                        
                                                        37,900,000$
                                                        0.15
                                                        
                                                        
                                                        6,000,000
                                                        
                                                        
                                                        
                                                        3.17
                                                        
                                                        
                                                        
                                                        6,000,000$
                                                        0.30
                                                        
                                                        
                                                        1,000,000
                                                        
                                                        
                                                        
                                                        0.83
                                                        
                                                        
                                                        
                                                        1,000,000$
                                                        0.50
                                                        
                                                        
                                                        5,000,000
                                                        
                                                        
                                                        
                                                        3.84
                                                        
                                                        
                                                        
                                                        5,000,000$
                                                        -
                                                        
                                                        
                                                        69,900,000
                                                        
                                                        
                                                        
                                                        3.95
                                                        
                                                        
                                                        
                                                        69,900,000
 
 8.            RELATED PARTY
TRANSACTIONS
  The
Company has entered into the following related party
transactions.  These transactions are considered in the ordinary
course of business and are measured at the exchange amount, which is the amount
of consideration established and agreed to by the related parties as year ended
December31, 2008
  F-22
  a)
              The company accrued management
      fees for the Chief Executive Officer and Chairperson of Board / Chief
      Financial Officer for the Years ended December 31, 2008 and 2007 was
      $480,000 and $375,000
respectively.
 
 b)
              From time to time the Company
      receives advances from the directors of the Company and total advances
      received during the years ended December 31, 2008 and 2007 were $162,266
      and $102,032, respectively.
 
 c)
              The Company records all
      amounts/loans due to two executives/directors in amounts due to related
      parties as disclosed in Note 5.  The amounts due to related
      parties are unsecured and due on demand and earn interest at the rate of
      10% per annum.  The balance due to the executives/directors as
      at the years ended December 31, 2008 and 2007 was $2,085,508 and
      $1,271,932 respectively.
 
 d)
              The Company recorded $171,310 in
      interest on the amounts due to related parties in the year ended December
      31, 2008, which are included in thebalance recorded in 8(c)
      above
 
 9.            COMMITMENTS AND EMPLOYMENT
AGREEMENTS/CONSULTANTS
 
 ·
              on January 1, 2008, Pursuant to
      various management and consulting contracts the Company has committed to
      pay (i) a monthly management fee of $30,000 to the Chairman/Chief
      Executive Officer/ Chief Financial Officer/ Chief Operation Officer on
      January 1, 2008 (ii) a monthly management fee of $10,000 to the Vice
      Chairman/President. The management fees have not been paid
      by the Company and are included in shareholder loans on the balance
      sheet. Payment terms are
unscheduled.
 
 ·
              On August 3 2007, the Company
      appointed Mr. Chen 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
      appointed Mr. 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
      16,000,000 common stocks warrants at an exercise price of $0.20 &$0.25
      per share. These warrants expire three years form the date of
      grant.
 
 10.           INCOME TAX
 
 The
Company is subject to US Federal and State income taxes. As of December 31, 2008
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, 2008 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.
 F-23
  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 to be approximately
$1,850,000.
 11.           SUBSEQUENT EVENTS
 
 On
February 9, 2009,
China Holdings, Inc. (the “Company”) has also reached AMENDEDRESOLUTIONS (based
on initial RESOLUTIONS on January 19, 2009) as disclosed in SEC Form 8-K on
February 10, 2009, as the following:
 
 ·
              Amended
      Resolution: the Company has finally agreed to pay for “Vintage Filings,
      LLP” with a total of 2,300,000 common stocks as SEC 144 rules/legends for
      “Vintage Filings, LLP”’s  all fairly valued services in 2008 and
      services in 2009 as defined agreed mutually. The Company agreed to legally
      issue/delivery the 2,300,000 common stocks certificate to “Vintage
      Filings, LLP” within 30-45 days via its SEC Registered Stock Transfer
      Agent.
 
 ·
              Amended
      Resolution: the Company has finally agreed to pay for “Cooley Godward
      Kronish, LLP” with a total of 700,000 common stocks as SEC 144
      rules/legends legal  fairly valued services from “Cooley Godward
      Kronish, LLP” to the Company’s 2Q 2008 SEC Form 10Q legal compliances. The
      Company agreed to legally issue/delivery the 700,000 common stocks
      certificate to “Cooley Godward Kronish, LLP” within 30-45 days via its SEC
      Registered Stock Transfer Agent.
  ·
              Amended
      Resolution: the Company has finally agreed to pay for “XinHuaPRNewswire”
      with a total of 800,000 common stocks as SEC 144 rules/legends for the
      press releases/ fairly valued services to the Company in 2008. The Company
      agreed to legally issue/delivery the 800,000 common stocks certificate to
      “XinHuaPRNewswire” within 30-45 days via its SEC Registered Stock Transfer
      Agent.
 
 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
      February 9, 2009, Amended
      Resolution: the Company has  agreed to Zheng Lun-Fan
      resignation from the Board of Directors of the
  Company.
 
 ·
              On
      February 12, 2009, the Board of Directors approved the grant of 1,000,000
      stock options with an exercise price of $0.02 per share for a period of
      one year, to Wall Street Reporter regarding a remuneration package for
      investor relation services being provided to the Company as further
      disclosed in a Form 8-K filed February 12,
2009.
 
 On
February 12, 2009, the Company has approved to issue a total of 500,000 common
stocks ( as SEC 144 rules/legends) to the Company/Subsidary’ Senior Vice
President as “Bonus Compensation” for his management consulting services to the
Company in 2008.
 
 On
February 12, 2009, the Board of Directors approved the grant of 1,000,000 stock
options with an exercise price of $0.02 per share for a period of one year, to
Wall Street Reporter regarding a remuneration package for investor relation
services being provided to the Company as further disclosed in a Form 8-K filed
February 12, 2009.
 
 ·
              On
      February 27, 2009, China Holdings, Inc. (“The Company”) has approved A
      BOARD RESOLUTION that James H. Simpson/Bevitor Holdings (Barbados) will
      remain as part-time IR consultant to assist the Company’s Global Investors
      Relationship and Public Relationship. The Company agrees to remain legally
      effective of A Total of 6,000,000 common stocks
      options/warrants  (at the prices of US$0.20 & US$0.25) which
      granted to Mr. Simpson/Bevitor Holdings in later 2008 with
      an  effective period until Dec 31, 2012. Currently, James H.
      Simpson Bevitor Holdings (Barbados) hold of more than 5-6 millions common
      stocks of China Holdings, Inc. (SEC 144 rules/legends) since the Company
      started trading on OTCBB in later
2005.
  F-24
  On
February 27, 2009, China Holdings, Inc. (“The Company”) has approved A BOARD
RESOLUTION that James H. Simpson/Bevitor Holdings (Barbados) will remain as
part-time IR consultant to assist the Company’s Global Investors Relationship
and Public Relationship. The Company agrees to remain legally effective of A
Total of 6,000,000 common stocks options/warrants  (at the prices of
US$0.20 & US$0.25) which granted to Mr. Simpson/Bevitor Holdings in later
2008 with an  effective period until Dec 31, 2012. There
is  no other agreements/compensations to James H. Simpson/Bevitor
Holdings since 2006.
 
 On
February 27, 2009, China Holdings, Inc. (“The Company”) has approved A BOARD
RESOLUTION that Ronald Shon, a Successful Canadian Businessman, will remain as
the Chairman of Advisory Board of the Company in 2009-2010 for his roles of
corporate financing and global strategy. The Company has legally granted Ronald
Shon with a total 15,000,000 common stocks options/warrants (at the prices of
US$0.20 & US$0.25) in 2007-2008 and issued/compensated with a total of
500,000 common stocks (as SEC 144 rules/legends) in 2007.
 
 ·
              On
      February 27, 2009, the Board of Directors approved the issuance of
      30,000,000 restricted 144 common shares to the CEO/Chairperson of the
      Company in consideration for significant 800 Sq KM lands assets/projects
      contributed to the Company as further disclosed in a Form 8-K filed
      February 27, 2009.
 
 ·
              On
      March 3, 2009, the Board of Directors approved the issuance of 18,000,000
      restricted 144 common shares to the CEO/Chairperson of the Company in
      consideration for significant 800 Sq KM lands assets/ projects contributed
      to the Company as further disclosed in a Form 8-K filed On March 3,
      2009
 
 ·
              On
      March 3, 2009, the Board of Directors approved the issuance of 4,000,000
      restricted 144 common shares  in 2009 to a Senior Vice President
      of the Company in consideration for significant services to the Company in
      2009 as disclosed details in a Form 8-K filed On March,
    2009..
 
 ·
              On
      March 18, 2009, China Holdings, Inc. (the “Company”) has approved the
      Company’s further development  plan of  An Initial
      Public Offering ( “ IPO”) US$200 - US$400 million  of “China
      Holdings, Inc.” in 2010 – 2011
upgrade:
 i.
              NASDAQ Small Cap Market or New
      York Stock Exchange, USA
 ii.
              Toronto Stock Exchange (TSX or
      TSX –V), Canada
 iii.
              AIM in London Stock Exchange,
      England
 
 ·
              On
      March 18, 2009, China Holdings, Inc. (the “Company”)
      has  approved the Company’s further development of US$1,000,000
      private placement offering, pursuant to Regulation S promulgated under the
      Securities Act of 1933, and pursuant to  Rule 501(a) of
      Regulation D under the Securities Act of 1933,as amended (the “Securities
      Act”) and WHEREAS, pursuant to Section 4(2) of the Securities Act of 1933,
      as amended (the “Securities Act”), and Rule 506 promulgated thereunder,
      the Company is offering up to 20,000,000 shares of the Company’s common
      stock (SEC 144 rules/legends) and warrants (SEC 144 rules/legends)to
      purchase 20,000,000 shares of the Company’s common stock in a private
      placement (the “Offering”) on the terms and conditions set forth herein:
      for eachshare of the
      Company’s common stock, $.001 par value (“Shares”), at a premium purchase
      price of USD $0.05 per share (the “Common Stock”), and  includes
      One (1) warrant (the “Warrant”) to purchase per share of Common Stock: the
      warrant is exercisable for a period of  (12) months, at a price
      $US0.20 per share. Upon further completion, the Company will file with SEC
      FORM 8-K for further legal disclosure and proper sec rules
      compliances.
  F-25
  The Use
of Proceeds of US$1,000,000 is for the Company’s Master Plan of Land /City
Planning: Phase IA Land Development:  The City Center: 20 Square KM
land of 100 Square Kilometer Land in Inner Mongolia, PR China. China Holdings,
Inc. is planning to fully complete The Master Plan of Land /City Planning: Phase
IA:  The City Center: 20 Square KM land of  100 Square
Kilometer Land in Inner Mongolia, PR Chin in four (4) months in August –
September 2009 approximately. China Holdings, Inc.’sMaster Plan : The Land
and City Planning - The Phase IA master plan is consist of 20 Square Kilometers
of land in Inner Mongolia, PR China: which provide with all the urban planning
& designs for all the streets & buildings ( commercial, residential,
industrial, & recreations) in initial 20 Sq. KM land – China Holdings, Inc.
‘s  objective is maximize the value of every square meter
of  20 – 100 Sq KM land as the ultimate value as multi-billion dollars
assets/revenues.
 
 ·
              On
      March 18, 2009, China Holdings, Inc. (the “Company”) has approved the
      Company’s further development plan of  An Initial Public
      Offering ( “ IPO”) US$200 - $400 million of “China Power, Inc.” in
      2010-2011 to list “China Power, Inc.” onto Toronto Stock Exchange or TSX
      –V enture in Canada or/and NASDAQ Small Cap
  Market.
 
 ·
              On
      March 18, 2009, China Holdings, Inc. (the “Company”) has also approved the
      Company’s controlled subsidiary: China Power, Inc.’s further development
      of US$3,000,000 private placement offering, pursuant to Regulation S
      promulgated under the Securities Act of 1933, and pursuant
      to  Rule 501(a) of Regulation D under the Securities Act of
      1933,as amended (the “Securities Act”) and WHEREAS, pursuant to Section
      4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
      Rule 506 promulgated thereunder, the Company is offering up to 6,000,000
      shares of the Company’s common stock (SEC 144 rules/legends) and warrants
      (SEC 144 rules/legends)to purchase 6,000,000 shares of the Company’s
      common stock in a private placement (the “Offering”) on the terms and
      conditions set forth herein: for eachshare of the
      Company’s common stock, $.001 par value (“Shares”), at a premium purchase
      price of USD $0.50 per share (the “Common Stock”), and  includes
      One (1) warrant (the “Warrant”) to purchase per share of Common Stock: the
      warrant is exercisable for a period of  (12) months, at a price
      $US1.00 per share. Upon further completion, the Company/China Power, Inc.
      will file with SEC FORM 8-K further legal disclosure and proper sec rules
      compliances.
 
 The Use
of Proceeds of US$3,000,000 are for the completion of  China Power,
Inc.’s 2000 MW Wind Power Plants - Phase I - Wind Resources Monitoring Programs
-300 MW Wind Power Plants" in 2009 for 6-12 months programs on 300 MW Wind Power
Plants as Phase I Development/Plan. The company expects to break ground in
2009-2010 for the initial 300 MW of wind power, to be completed in 2-3
years.
  F-26