UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   Form 10-KSB

 (Mark One)

          [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934
                                     FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

          [_]  TRANSITION  REPORT  UNDER  SECTION13  OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934
                         FOR THE TRANSITION PERIOD FROM __________ TO __________
                         COMMISSION FILE NUMBER ________________________________

                           CHINA HEALTH HOLDING, INC.
                  ---------------------------------------------
                (Name of small business issuer in its charter)

              NEVADA                                    98-0432681
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

                             Julianna Lu, BSc. MSc.
                             Chief Executive Officer
        101 Convention Center Drive, Suite 700, Las Vegas, NV 89107-2001
               (Address of principal executive offices) (Zip Code)
                   Issuer's telephone Number: 1 (877) 883-0979

                                 Mailing Address
     Suite 600 - 666 Burrard St., Park Place, Vancouver, British Columbia,
                                 Canada V6C 2X8

                   Issuer's telephone Number: 1 (604) 608-6788


                                   Copies to:
                            Richard A. Friedman, Esq.
                       Sichenzia Ross Friedman Ference LLP
                           1065 Avenue of the Americas
                            New York, New York 10018
                              Phone: (212) 930-9700
                               Fax: (212) 930-9725


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

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

     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
[_]

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


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

     State issuer's revenues for its most recent fiscal year. $1,671.

     The aggregate market value of the issued and outstanding common stock held
by non-affiliates of China Health Holding, Inc. based upon the closing price of
the Common Stock as quoted on the Over the Counter Bulleting Board (OTCBB) on
March 17, 2006, was approximately $2,670,434.96

     As of March 17, 2006, the issuer had 60,214,551 outstanding shares of
Common Stock and 1,000,000 shares of Series "A" Preferred Stock.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

     Transitional Small Business Disclosure Format (check one): Yes [_] No [X]


<PAGE>

<TABLE>
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                                TABLE OF CONTENTS

                                                                                                   Page
                                     PART I

<S>  <C>                                                                                             <C>
Item 1.      Description of Business...............................................................  1
Item 2.      Description of Property............................................................... 28
Item 3.      Legal Proceedings..................................................................... 28
Item 4.      Submission of Matters to a Vote of Security Holders................................... 28

                                     PART II

Item 5.      Market for Common Equity and Related Stockholder Matters.............................. 29
Item 6.      Management's Discussion and Analysis or Plan of Operation............................. 35
Item 7.      Financial Statements.................................................................. 47
Item 8.      Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.. 47
Item 8A.     Controls and Procedures............................................................... 47
Item 8B.     Other Information..................................................................... 47

                                    PART III

Item 9.      Directors, Executive Officers, Promoters and Control Persons;
             Compliance With Section 16(a) of the Exchange Act..................................... 48
Item 10.     Executive Compensation................................................................ 50
Item 11.     Security Ownership of Certain Beneficial Owners and Management........................ 53
Item 12.     Certain Relationship and Related Transactions......................................... 54
Item 13.     Exhibits.............................................................................. 55
Item 14.     Principal Accountant Fees and Services................................................ 58

SIGNATURES......................................................................................... 59
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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.


<PAGE>
                                     PART I

Item 1. Description of Business.



     We are a development stage company, founded by our Chairman and Chief
Executive Officer, Julianna Lu, in 2002 with the goal of becoming a leading
manufacturer, marketer and distributor in the global natural medical and
pharmaceutical industry. On April 3, 2002, we were incorporated under the laws
of the State of Nevada under the name A E&E Pharma Corporation. On May 25, 2004,
we changed our name to China Health Holding, Inc. Our common stock trades on the
OTC Bulletin Board under the symbol "CHHH" since April 18, 2005.

     We intend to manufacture, market and distribute proprietary natural
medicinal products. Our product lines include:

          1.   King of Herbs-based products;

          2.   Taoist Medicinal products; and

          3.   A line of natural multi-vitamins and supplements.


     All of our products are based on traditional Chinese medicine and the
principals of Taoism. Taoist philosophy and Taoist medicinal healing practices
have been incorporated into a broad spectrum of medical practices and treatments
in the People's Republic of China. Traditional Chinese medicine practices have
generally been labeled worldwide as "alternative medicine" or "holistic
medicine" since they rely more on natural remedies versus chemical remedies and
treatments.

PRODUCTS

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

     We also plan to introduce a line of natural skin care and cosmetic products
as well as to develop new products based on our knowledge of traditional Chinese
medical practice.

                                       1
<PAGE>
     Our product lines are based on two key fundamentals - the healing power of
King of Herbs and the thousands of years of history that forms the basis for
traditional Chinese medicine and Taoist medicine.


KING OF HERBS PRODUCT LINE


     King of Herbs is a term that we use to refer to the main proprietary herbal
formulations that are essential to all of our products. The herbs that make up
King of Herbs have been used in Chinese medicine to reinforce what is called the
body's vital energy source, or qii. Qii is a Chinese medical term for the human
body's energy. Our product line is intended to improve immune system and
cardio-vascular system, and improve and increase energy and endurance levels,
sexual function and the health and wellness of the entire body. We have
developed proprietary formulations that target certain physiological conditions
which we intend to market and sell to the public.

     o    VG-KING. A natural tonic for men's health, formulated specifically for
          the male genitor-urinary system.
     o    VG-QUEEN. A natural product for women's health, formulated
          specifically for the female reproductive system.
     o    VG-VITAL. This formula acts as a natural energy resource and
          anti-oxidant. This product also is marketed as an anti-fatigue and
          anti-aging agent and as a supplement to restore qii.
     o    VG-CARDIOVASCULAR. Designed to improve the function of the
          cardiovascular system, thereby improving overall health.
     o    VG-IMMUNE. Enhances the body's immune system.
     o    VG-BRAIN & MEMORY. Designed to increase blood flow to the brain and
          cerebral system to enhance memory and cerebral functions.
     o    VG-LIVER. Enhances liver function and protects it from damage from
          inflammation and oxidation.
     o    VG-LUNG. Designed to assist the functioning of the upper respiratory
          tract and lungs. This product also is marketed to increase respiratory
          ventilation for athletes.
     o    VG-LONGEVITY. A special formula for prolonging people's life by
          reducing the progress of aging. This product is designed to assist the
          body at multiple system levels, including the immune, nervous,
          cardiovascular and respiratory systems.
     o    VG-PANCREAS HEALTH. A special formula designed to promote healthy
          blood glucose levels.
     o    VG-HEALTH. A formula designed to help maintain a healthy immune
          system.
     o    VG-PROSTATE HEALTH. Designed to help ensure a healthy prostate.
     o    VG-WEIGHT CONTROL. Formulated to assist individuals with their weight
          loss goals.


                                       2
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TAOIST MEDICINAL PRODUCT LINE


     Taoist medicinal healing sciences have been incorporated into a broad
spectrum of medical practices and treatments in the People's Republic of China
and are collectively known as traditional Chinese medicine. From a global
perspective, medical treatments are divided into two broad categories: western
medicine and traditional Chinese medicine. In the United States and other
western countries, traditional Chinese treatments have been labeled "alternative
medicine" or "holistic medicine." The products in our Taoist Medicinal product
line are considered to be dietary supplements. They are based on the principles
of traditional Chinese medicine and Taoist healing sciences. Taoism is an
ancient worldview that acknowledges the movement towards balance inherent in all
things.

     o    VG-NRP (Nine Rare Pill). Formulated to enhance liver and kidney
          function and decrease lassitude in loin and knee.
     o    VG-MP (Motherwort Pill with Ten Precious Ingredients). Designed to
          enhance the tonifying qii and blood, enhance female regeneration
          functions and enhance the body's energy and endurance levels.
     o    VG-EPP (Decoction of Eight Precious Products for Refreshing). Designed
          to prevent restlessness.
     o    VG-PFI (Pill of Four Immortals). Designed to enhance kidney functions.
     o    VG-NWP (Nine-Wei Powder for Strengthening Yang). Primarily for men,
          this product is designed to nourish marrow and promote flow of kidney
          qii.
     o    VG-FKB (Five Kernel Bolus). Moistens the intestines.
     o    VG-LYZR (Bolus of Longyan Aril and Wild Jujube Seed). Enriches the
          blood, tranquilize the mind and tone the kidney.
     o    VG-ZMGQ (Bolus of Sesame Seed and Wolfberry Fruit). Designed to
          invigorate the liver and kidney.
     o    VG-HTZM (Bolus of Walnut and Sesame Seed). Designed to invigorate the
          liver, tone the kidney, promote healthy eyes and moisten the
          intestines.
     o    VG-LZFL (Cake of Lotus Seed and Poria). Designed to strengthen the
          spleen.


108 100% NATURAL TAIOIST HERBAL MEDICINAL PRODUCTS
1. Fanxie Jianfei Yin
FUNCTIONS: Purgation, removing stagnancy, obesity treatment
INDICATION: Adiposis

2. Qingshen Yishou Gao
FUNCTIONS: Invigorating spleen and drying damp, obesity treatment, prolong life
INDICATION: Adiposis with pathogenic damp

                                       3
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3. Jianfei Yannian San

FUNCTIONS: Soothing the liver and regulating qi, removing blood stasis and
postponing senescence
INDICATIONS: Adiposis, hyperlipaemia, arteriosclerosis

4. Juhua Jueming Yin
FUNCTIONS: Clearing heat and dispelling wind, calming liver-yang and purging
liver-fire
INDICATIONS: Hypertension, hyperlipaemia

5. Juhua Jiangya San
FUNCTIONS: Dispelling wind and clearing heat, lowering qi and soothing the liver
INDICATIONS: Hypertension, senile wind-heat common cold in spring

6. Ershi San
FUNCTION: Dispelling wind and relieving exterior syndrome
INDICATIONS:Common cold, fever with chilliness, sore-throat, tonsillitis

7. Qingre Sigen Yin
FUNCTIONS: Clearing heat and cooling blood, dispelling wind and activating
collaterals

INDICATIONS: Fever, hyperthermia with lethargy, distortion of the face with
crooked mouth and eye due to theoplegia

8. Chaihu Gegen Yin
FUNCTION: Expelling pathogenic factors from muscles and superficies
INDICATION: Wind-cold common cold

9. Yazhicao Yin
FUNCTION: Clearing heat and removing toxic substance
INDICATION: Summer-heat common cold

10. Huoxiang Baizhi Yin
FUNCTIONS: Relieving exterior syndrome to resolve damp, invigorating spleen and
regulating stomach
INDICATION: Enterogastric common cold

11. Yesu Tianwang San
FUNCTIONS: Reconciling and expelling pathogenic factors from the superficies,
clearing heat and dredging orifices
INDICATIONS: Common cold, malaria, pulmonary tuberculosis, hectic fever

12. Tulianqiao Yin
FUNCTIONS: Clearing heat and removing toxic substance, relieving the exterior
syndrome with drugs of pungent taste and cool nature, relieving cough
INDICATIONS: Wind-heat common cold, pharyngodynia, abundant expectoration, cough

13. Ziyang Feiyin Gao FUNCTION: Nourishing yin and lung
INDICATION: Tussis due to deficiency of lung-yin

14. Ermu San
FUNCTIONS: Moisturizing lung and resolving sputum, clearing heat and relieving
cough
INDICATION: Tussis due to lung-heat

                                       5
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15. Shixiantao Yin
FUNCTION: Clearing lung-heat to relieve cough
INDICATION: Cough with thin sputum

16. Baibu Donghua San
FUNCTIONS: Clearing lung-heat and lowering qi, eliminating sputum and relieving
cough
INDICATIONS: Acute and chronic tussis with wind-heat or wind-cold or
wind-dryness syndrome, abundant expectoration or not

17. Xiangling Yin
FUNCTION: Moisturizing lung to relieve cough
INDICATIONS: Tussis due to lung-heat and lung-dryness, pulmonary tuberculosis

18. Chuanbei Baiji San
FUNCTIONS: Moisturizing lung and resolving sputum, clearing heat and relieving
cough

INDICATION: Hemoptysis due to tuberculosis

19. Didan San
FUNCTION: Purging fire and clearing heat
INDICATIONS: Laryngopharyngitis, chorditis vocalis, asthma due to acute and
chronic bronchitis

                                       4
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20. Qingguteng San
FUNCTION: Clearing heat and removing toxic substance
INDICATIONS: Acute bronchitis, hyperthermia, pectoralgia

21. Juhua Sangye Yin
FUNCTION: Dispelling wind and heat, moisturizing lung to relieve cough
INDICATION: Acute bronchitis

22. Qiupi Mahuang Yin
FUNCTIONS: Clearing heat and removing toxic substance, moisturizing lung to
relieve cough
INDICATION: Chronic bronchitis with abundant expectoration and cough

23. Shuanghua Lianqiao Yin
FUNCTIONS: Clearing heat and dissipating sputum, relieving cough and asthma
INDICATION: Chronic bronchitis

24. Sanren Gao
FUNCTIONS: Lowering qi and relieving asthma, removing sputum and resolving
stasis
INDICATIONS: Senile chronic bronchitis, pulmonary emphysema

25. Baitan Doukou Yin
FUNCTIONS: Promoting blood circulation to remove blood stasis, dredging
meridians and activating collaterals
INDICATIONS: Coronary heart disease, angina pectoris

                                       6
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26. Danshen Honghua Yin
FUNCTIONS: Promoting blood circulation to remove blood stasis, dredging
meridians and activating collaterals
INDICATIONS: Coronary heart disease, angina pectoris

27. Huangqi Sanqi Yin
FUNCTIONS: Promoting blood circulation to remove blood stasis, dredging
meridians and activating collaterals
INDICATION: Coronary heart disease with hypertension

28. Duzhong Danshen Jiu
FUNCTIONS: Promoting blood circulation to remove blood stasis, dredging
meridians and activating collaterals
INDICATIONS: Senile and middle-aged wind-cold-damp arthralgia, numbness of limbs
due to sluggishness qi and blood stasis, hemiparalysis due to cerebral
thrombosis, coronary heart disease

29. Huoxue Tongluo San
FUNCTIONS: Promoting qi and blood circulation, dispersing wind and dredging
meridian
INDICATIONS: Theoplegia premonitory with
extremity-numbness, theoplegia sequel with hemiparalysis

30. Xianling Mugua Jiu
FUNCTIONS: Warming kidney and reinforcing yang, eliminating damp and
dispelling cold, analgesia
INDICATIONS: Arthralgia, numbness of limbs, lassitude in loin and legs due to
deficiency of spleen-yang and kidney-yang, sexual hypoesthesia, sexual
impotence, sterility

31. Danggui Huoluo Jiu
FUNCTIONS: Supplementing qi and nourishing blood, dispelling wind and removing
damp, analgesia
INDICATIONS: Lumbar muscle strain, scapulohumeral periarthritis, cervical
spondylopathy, hemiparalysis due to cerebral thrombosis

32. Baizhu Qufeng Jiu
FUNCTIONS: Dispelling wind and removing damp, relaxing muscles and tendon,
promoting blood circulation, reducing swelling and analgesia
INDICATIONS: Rheumatic arthritis, rheumatoid arthritis, sciatica

33. Qufeng Tongluo Jiu
FUNCTIONS: Promoting qi and blood circulation, dispelling wind and dredging
collaterals
INDICATIONS: Rheumatic arthritis, rheumatoid arthritis, ischemic necrosis of
femoral head

34. Sanqi Huoxue Jiu
FUNCTIONS: Promoting qi and blood circulation, dispelling wind and removing damp
INDICATIONS: Arthrotrauma, stagnation of blood and swelling pain due to
traumatic injury, arthritis

                                       7
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35. Xuelian Huoxue Tongluo Yin
FUNCTIONS:Clearing heat and eliminating damp, promoting blood circulation and
dredging collaterals
INDICATION: Rheumatic arthritis

36. Wuweizigen Yin
FUNCTION: Dispelling wind and removing damp
INDICATION: Wind-cold or damp-heat arthralgia

37. Xianteng Shuangjian Yin
FUNCTIONS: Removing damp, resolving phlegm, dredging collaterals
INDICATION: Scapulohumeral periarthritis due to stagnation of phlegm-damp

38. Jiuhua Kangshuai Dan
FUNCTIONS: Regulating five zang-organs and six fu-organs, postponing senescence
and prolong life
INDICATION: Senilism

39. Fuling Yanshuai Wan
FUNCTIONS: Invigorating spleen to eliminate damp, postponing senescence and
prolong life
INDICATIONS: Food retention, marasmus, senilism

40. Baiyun Yanshou Dan
FUNCTION: Supplementing stomach-qi and spleen-qi
INDICATIONS: Chronic sympyom of digestive tract with anorexia, senilism

41. Buqi Yangxue Gao
FUNCTION: Invigorating qi and nourishing blood
INDICATIONS: Marasmus, lassitude, emaciation, anorexia due to deficiency of qi
and blood

42. Jianpi Xiaoshi San
FUNCTIONS: Regulating qi and blood, relieving dyspepsia
INDICATIONS: Anorexia and dyspepsia due to deficiency of qi and blood

43. Jiedu Yinyang San
FUNCTION: Clearing heat and removing toxic substance
INDICATION: stomatocace due to damp-heat toxic substance

44. Qinghuo Xuanmen Dan
FUNCTION: Nourishing yin and clearing fire
INDICATION: Chronic stomatocace due to deficiency of spleen-stomach-yin and
flaring-up of fire of deficiency type

45. Wenwei San
FUNCTION: Drying damp and warming stomach
INDICATION: Stomach-ache due to stomach deficiency-cold syndrome

46. Zhiweihantong Fang
FUNCTIONS: Warming stomachd, dispelling cold, analgesia
INDICATIONS: Gastric ulcer, chronic gastritis, gastrospasm, stomach-ache
due to stomach cold-syndrome

                                       8
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47. Zhiweiretong Fang
FUNCTIONS: Eliminating heat-accumulation, Promoting qi to relieve
flatulence, analgesia
INDICATIONS: Chronic gastritis due to Helicobacter pylori, gastric
ulcer, stomach-ache due to accumulation of heat in intestine and stomach,
abdominal distension and constipation

48. Zhiqizhi Weitong Fang
FUNCTIONS: Regulating qi and promoting blood circulation, relieving pain
INDICATION: Stomach distention and stomach ache due to sluggishness of qi and
stasis of blood

49. Zhidanshizheng Yin
FUNCTION: Eliminating gallstones
INDICATION: Cholelithiasis

50. Yujin Jianghuang Tang
FUNCTIONS: Eliminating damp and heat, promoting liver and bile secretion
INDICATIONS: Cholecystitis, inflammation of biliary tract

51. Luxian Sheshe Yin
FUNCTIONS: Nourishing liver, promoting diuresis
INDICATION: Ascites due to cirrhosis of liver

52. Didan Baogan Yin
FUNCTIONS:  Purging  excess-fire  of liver and  bile,  clearing  excess-heat  of
sanjiao
INDICATION: Cirrhosis of liver

53. Mabian Yangpi Yin
FUNCTION: Relieving flatulence, analgesia, removing stasis, dredging meridians
INDICATIONS: splenomegaly, enlarged ovarian cyst

54. Liniao Xiaozhong Yin FUNCTION: Promoting diuresis to reduce edema
INDICATION: Hydropsy

55. Tinglizi Xiaozhong Yin
FUNCTIONS: Warming and invigorating heart-yang and kidney-yang, reducing edema
INDICATION: Hydropsy

56. Dongguaren Xiaozhong Yin FUNCTION: Promoting diuresis to reduce edema
INDICATION: Hydropsy due to acute and chronic nephritis

57. Sheshe Qingre Jiedu San
FUNCTIONS:  Clearing heat and removing toxic  substance,  promoting  diuresis to
reduce edema, promoting blood circulation to analgesia
INDICATION: Early lung cancer

58. Sheshe Hujiao San
FUNCTION: Clearing heat and removing toxic substance
INDICATION: Mammary cancer

59. ShuiHuo Jiji Dan
FUNCTIONS:  Regulating  five  zang-organs,  clearing  heat  and  removing  toxic
substance
INDICATIONS:  Early stomach cancer, atrophic gastritis, five kinds of strain and
seven kinds of impairments, consumptive disease

                                       9
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60. Shoushu Zihua Yin FUNCTION: Removing toxic substance
INDICATIONS: Early carcinoma of esophagus, early carcinoma of cardia of stomach

61. Kushi Muteng San FUNCTION: Removing toxic substance
INDICATIONS: Early carcinoma of esophagus, Early stomach cancer

62. Dangshen Sheshe Yin
FUNCTIONS: Invigorating qi and blood, removing toxic substance
INDICATION: Postoperative maintenance of late gastric cancer

63. WuXing Yishou Dan
FUNCTIONS: Invigorating qi and blood, regulating immunity, prolong life
INDICATION: Tumor of digestive tract due to deficiency of qi-blood and yin-yang

64. Xungu Cilao Yin
FUNCTIONS: Removing toxic substance, nourishing liver, invigorating qi
INDICATION: Early liver cancer

65. Baidu Zhizhu Yin
FUNCTIONS:  Clearing heat and removing toxic substance,  promoting qi to relieve
dyspepsia, resolving mass and stagnation
INDICATION: Early rectal cancer

66. Dihuang Changshou Dan
FUNCTION: Tonifying kidney and invigorating qi
INDICATIONS: Diabetes, marasmus and thirst due to deficiency of kidney

67. Erhuang Yannian San
FUNCTIONS:  Tonifying kidney-yin,  replenishing essence and blood, strengthening
qi
INDICATION: Diabetes

68. Meifa San
FUNCTIONS: Nourishing kidney and brain, nourishing heart and hair
INDICATION: Early graying of hair due to deficiency of blood

69. Dihuang Meifa San
FUNCTION: Nourishing kidney and hair
INDICATION: Early graying of hair due to deficiency of kidney

70. Huangjing Runfu Gao
FUNCTION: Nourishing skin and prolong life

71. Sanjing Meiyan Wan
FUNCTIONS: Nourishing skin and prolong life, obesity treatment

72. Yangyin Runbian San
FUNCTIONS:  Nourishing  stomach-yin,  lubricating bowel to relieve constipation,
nourishing skin

INDICATION: Constipation due to deficiency of stomach-yin and body fluid

73. Pugong Shiwei Yin
FUNCTION:Resolving damp and promoting diuresis
INDICATION: Chronic prostatitis

74. Yuanzhi Bujing Wan FUNCTIONS: Tonifying brain and kidney
INDICATIONS: Sexual hypoesthesia, sexual impotence, sleeplessness, amnesia

                                       10
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75. Fuling Huming Wan
FUNCTION: Warming yang of heart and kidney
INDICATION: Sexual impotence

76. Shanyao Bushen Wan FUNCTION: Nourishing kidney-essence
INDICATIONS:  Sexual  hypoesthesia,   sexual  impotence  due  to  deficiency  of
kidney-essence

77. Zhiyangwei Wan FUNCTION: Nourishing kidney-essence INDICATION: Sexual
impotence

78. Shijining San FUNCTION: Nourishing kidney-essence INDICATION: Sexual
impotence

79. Zishen wan
FUNCTIONS: Nourishing yin and invigorating yang, nourishing kidney-essence
INDICATIONS: Sexual impotence, acyesis

80. Yanshuai Dan
FUNCTIONS:   Nourishing   kidney-essence,    regulating   immunity,   postponing
senescence, prolong life

81. Yangxin Bushen Wan
FUNCTIONS: Warming heart-yang, nourishing kidney-essence,
INDICATIONS: Sexual impotence, phallocrypsis due to libertinism

82. Xianren Huanshao Dan
FUNCTIONS: Nourishing kidney-essence, postponing senescence, prolong life

83. Yishou Dan
FUNCTIONS: Nourishing heart and kidney, Nourishing skin, strengthen the bone and
muscle, prolong life

84. Yangshou Dan
FUNCTIONS:  Nourishing  heart and kidney,  Nourishing  skin,  replenishing  bone
marrow, prolong life

85. Shenxian Yanshou Dan
FUNCTIONS:   Nourishing   kidney-essence,   invigorating  heart-qi,   postponing
senescence, prolong life

86. Zhibai Changshou Wan
FUNCTIONS:  Nourishing yin and invigorating yang, postponing  senescence,prolong
life

87. Shouwu Changshou Dan
FUNCTIONS: Nourishing kidney-essence, postponing senescence, prolong life
INDICATIONS: Early graying of hair due to deficiency of kidney, Senilism

88 Baizi Changshou Dan
FUNCTIONS: Nourishing heart and brain, postponing senescence, prolong life
INDICATIONS: Senilism, hypomnesis

89. Jusheng Changshou Dan
FUNCTIONS:  Invigorating  yang and  replenishing  essence,  nourishing brain and
strengthen kidney, postponing senescence, prolong life
INDICATIONS: Sexual impotence, premature ejaculation, hypomnesis, senilism

                                       11
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90. Baijie Anshen Yin FUNCTION: Tranquilization INDICATION: Insomnia,

91. Xinteng Anshen Yin FUNCTION: Tranquilization INDICATION: Insomnia

92. Ruxiang Bibo San
FUNCTION: Nourishing heart to calm the mind
INDICATIONS: Neurasthenia, insomnia, amnesia

93. Baimu Yangjing Wan
FUNCTION: Nourishing heart and brain, arresting seminal emission
INDICATIONS: hypomnesis, insomnia and dreamful sleep

94. Changpu Tongqiao Wan
FUNCTION: Nourishing heart and brain, dredging orifices
INDICATIONS: Memory loss, precursory symptom of senile dementia

95. Fushen Chenxiang Wan
FUNCTION: Nourishing yin and heart
INDICATIONS: hypomnesis, insomnia and dreamful sleep due to deficiency of qi-yin
of heart

96. Bushen Anshen Yin
FUNCTION: Tonifying kidney to relieve mental strain
INDICATION: Insomnia due to deficiency of kidney

97. Fushen Xiangfu Wan
FUNCTIONS: Restoring normal coordination between the heart (fire) and the kidney
(water), regulating yin and yang
INDICATIONS: Palpitation due to terror, insomnia and amnesia

98. Bunao Yangxin Wan
FUNCTION:Nourishing heart and brain, tranquilization
INDICATION: Mental strain

99. Manjun Yizhi San
FUNCTION: Nourishing heart to calm the mind, invigorating brain to reinforce
INDICATION: Neurasthenic syndrome

100. Yangxin Anshen Wan
FUNCTION: Nourishing brain and relieving mental stress.
INDICATIONS(pound)(0)hypomnesis, insomnia and dreamful sleep

101. Wushen Yangxin Wan
FUNCTIONS:   Nourishing   qi  and  yin,   dredging   meridians   and   promoting
bloodcirculation
INDICATIONS:  (1) insomnia,  dreamful sleep and amnesia due to qi-yin deficiency
and  blockage  of  meridian  (2)  arrhythmia,   viral   myocarditis,   rheumatic
myocarditis

102. Qingxin Zishen Wan
FUNCTION: Clearing heart-fire and nourishing kidney
INDICATIONS:  Hyperactivity  of  fire  due to yin  deficiency,  night  sweating,
nocturnal emission due to libertinism

103. Xinshen Jiji Wan
FUNCTION:   Restoring  normal  coordination  between  the  heart(fire)  and  the
kidney(water)
INDICATIONS:  Hypomnesis,  insomnia and dreamful sleep due to kidney  deficiency
and upward flaming of heart-fire,  seminal emission, sexual impotence, premature
ejaculation

                                       12
<PAGE>
104. Zishen Jianghuo Wan
FUNCTION: Nourishing kidney-water and lowering heart-fire
INDICATIONS:  Hypomnesis,  insomnia and dreamful sleep due to kidney  deficiency
and upward flaming of heart-fire,  seminal emission, sexual impotence, premature
ejaculation

105. Songzhi Yangxin Dan
FUNCTIONS: Nourishing brain and relieving mental stress, postponing
senescence and prolong life

106. Kaiqiao Ningshen Wan
FUNCTION :Warming heart-yang, inducing resuscitation and eliminating damp,
removing phlegm, tranquilization. INDICATION(pound)(0)Hypomnesis and
neurasthenic due to deficiency of heart-yang, precursory symptom of senile
dementia

107. Xiexia Tongbian Yin
FUNCTION: Relieving constipation by purgation
INDICATION: Habitual constipation

108. Runbian Wan
FUNCTION: Lubricating bowel to relieve constipation.
INDICATION: Senile constipation




MULTI-VITAMINS AND SUPPLEMENTS


         This product line will offer a full compliment of 100% natural
multi-vitamins and multi-mineral food supplements. These products are intended
to support the immune system, increase energy, provide stress relief, strengthen
bones, enhance mental clarity and support relaxation and overall vitality.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Vitamin A Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                     <C>                                      <C>             <C>
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Beta-Carotene                       TAB. 90033-U        Antioxidant                                10,000IU       Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Cod Liver Oil                       SGL.  500062        A rich source of Omega 3 fatty acids         20min       SoftGels
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Cod Liver Oil                       SGL. 50060          A rich source of Omega 3 fatty acids         10min       SoftGels
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Halibut Liver Oil                   SGL. 500064         A rich source of Vitamins A & D            5000iu A      SoftGels
                                                                                                    400iu D
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

                                       13
<PAGE>

---------------------------------------------------------------------------------------------------------------------------
Vitamin B Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Folic Acid                          TAB. 900021         An essential prenatal                         1mg         Tablets
                                                        nutrient.
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin B6                          TAB. 900027-U       Supports energy & stress relief              100mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin B12                                                                                         250mcg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin B Complex 50                TAB. 900041-C       Supports energy & stress relief              50mg         Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin B-Complex 50 (TR)           TAB. 900015-C       Supports energy & stress relief              50mg         Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
B-Complex  with 300mg Vitamin C     TAB. 90009-C        Supports energy & stress relief              multi        Tablets
(TR)
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Stress B-Complex                    TAB. 900013-C       Supports energy & stress relief              multi        Tablets
with 600mg Vitamin C                      .             Anti-Homocysteine
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin C Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin C                           TAB. 900035-C       Supports immune system. Antioxidant          250mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin C                           TAB. 900029         Supports immune system. Antioxidant          500mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin C                           TAB. 900047-C       Supports immune system. Antioxidant         1000mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin C Chewable Orange           TAB. 900017-U       Supports immune system. Antioxidant          250mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin C Chewable Orange           TAB. 900043-U       Supports immune system. Antioxidant          500mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin C (TR)                      TAB. 900025-C       Supports immune health                       500mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin C (TR)                      TAB. 900019-C       Supports immune health                      1000mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin C with Rosehips             TAB. 900039-C       Supports immune health                       500mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

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

                                       14
<PAGE>

---------------------------------------------------------------------------------------------------------------------------
Vitamin E Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin E Natural Source            SGL. 500014         Nutritional support for heart health         400IU       SoftGels
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin E Natural Source            SGL. 500056         Nutritional support for heart health         800IU       SoftGels
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin E Synthetic                 SGL. 50002          Nutritional support for heart health         400IU       SoftGels
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin E Synthetic                 SGL. 500058         Nutritional support for heart health         800IU       SoftGels
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

---------------------------------------------------------------------------------------------------------------------------
AntiOxidant Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
ACES Formula                        N/A                 Antioxidant                                  Multi        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
                                                        Nutritional support for heart health         30 mg       Capsules
CoEnzyme Q10                        CAP. 800045         Antioxidant
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

----------------------------------- ------------------- --------------------------------------- ---------------- ----------
---------------------------------------------------------------------------------------------------------------------------
Calcium Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Calcium (Carbonate)                 TAB. 900081-C       Promotes strong bones                       1500mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Calcium (Carbonate) with Vitamin D  TAB. 900007-C       Promotes strong bones                       1500mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Natural Source Calcium (Carbonate)  TAB. 900077-C       Promotes strong bones                        500mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Natural Source Calcium                                                                               500mg        Tablets
(Carbonate) w/D                     TAB. 9000003-C      Promotes strong bones
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Natural Source Calcium                                                                               500mg        Tablets
(Carbonate) w/D                     TAB. 9000003-C      Promotes strong bones
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Natural Source Calcium                                                                               250mg        Tablets
(Carbonate) w/D N/A Promotes strong bones
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Calcium & Magnesium with Vitamin D  TAB. 900057-C       Promotes strong bones                     333mg/166mg     Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Calcium Citrate w/D                 TAB. 900067-C       Promotes strong bones                        300mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin D                           TAB. 900105-U       Promotes strong bones                       1000iu        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Vitamin D                           TAB. 900103-U       Promotes strong bones                        400iu        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

                                       15
<PAGE>
---------------------------------------------------------------------------------------------------------------------------
Essential Fatty Acid Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Evening Primrose Oil                SGL. 500026         A rich source of essential fatty acids       500mg        SoftGel
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Evening Primrose Oil                SGL. 500028         A rich source of essential fatty acids      1000mg        SoftGel
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Flaxseed Oil (Organic)              SGL. 500052         A rich source of essential fatty acids      1000 mg       SoftGel
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Lecithin (Unbleached)               SGL. 500040         Support for mental function                 1200mg        SoftGel
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Omega 3-6-9                         SGL. 500012         Nutritional support for heart               1200mg        SoftGel
                                                        health    Essential Fatty acids
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Salmon Oil - Wild                   SGL. 500054         Nutritional support for heart               1000mg        SoftGel
                                                        health    Essential Fatty acids
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

---------------------------------------------------------------------------------------------------------------------------
Herbal Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Cranberry Extract 18:1              CAP. 800041         Nutritional support for the urinary          100mg       Capsules
                                                        tract
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Devil's Claw                        CAP. 800037         Herbal support for joint health              500mg       Capsules
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Echinacea (Purpurea                                                                                  400mg       Capsules
Herb/Angustifolia Herb & Root)      CAP. 800029         Herbal support for the immune system
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Echinacea Extract 4%                CAP. 800029         Herbal support for the immune system         400mg       Capsules
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Feverfew Extract 0.5%               CAP. 800051         Herbal support for migraine headaches        125mg       Capsules
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Garlic Oil (Odour Free)             SGL. 500048         Supports immune health                       500mg       SoftGels
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

                                       16
<PAGE>
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
                                                        Herbal support for health, vitality &        500mg       Capsules
Garlic Pure  / Allicin-Rich         CAP. 800055         immunity
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Ginkgo Biloba 24/6                  CAP. 800033         Herbal support for mental alertness          60mg        Capsules
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Ginseng (Panax) Root                CAP. 800047         Herbal support for energy & vitality         100mg       Capsules
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Grape Seed Extract                                                                                   50mg        Capsules
(MegaNatural Gold TM)               CAP. 800035         A rich source of antioxidants
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Milk Thistle Extract 80%            CAP. 800043         Herbal support for liver health              150mg       Capsules
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
                                                        Herbal support to promote prostate           160mg       SoftGels
Saw Palmetto                        SGL. 500050         health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
St John's Wort Extract 0.3%         CAP. 800031         Herbal support to promote relaxation         300mg       Capsules
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

--------------------------------------------------------------------------------------------------------------------------
Joint Support Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Glucosamine Sulfate   (Sodium       CAP. 800017         Nutritional building blocks for joint        500mg       Capsules
Free)                                                   health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Glucosamine Sulfate   (Sodium                           Nutritional building blocks for joint        500mg       Capsules
Free)                               CAP. 800017         health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Glucosamine Sulfate   (Sodium                           Nutritional building blocks for joint       1000mg       Capsules
Free)                               N/A                 health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Glucosamine (Sodium Free)  &                            Nutritional building blocks for joint        450mg       Capsules
Chondroitin Sulfate                 CAP. 800039         health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Glucosamine (Sodium Free)  &                            Nutritional building blocks for joint        900mg       Capsules
Chondroitin Sulfate                 CAP. 800115         health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Glucosamine (Sodium Free)  &                            Nutritional building blocks for joint        900mg       Capsules
Chondroitin Sulfate                 CAP. 800115         health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Glucosamine Sulfate (Sodium Free)                       Nutritional building blocks for joint        900mg       Capsules
& OptiMSMTM                         CAP. 800053         health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
OptiMSMTM                           CAP. 800049         Nutritional support for joint health         500mg       Capsules
methyl sulfonyl methane
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
OptiMSMTM
                                                                                                    1000mg       Capsules
methyl sulfonyl methane             CAP. 800005         Nutritional support for joint health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Shark Cartilage                     CAP. 800057         Nutritional building blocks for joint        750mg       Capsules
                                                        health
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

                                       17
<PAGE>
---------------------------------------------------------------------------------------------------------------------------
Mineral Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Iron (Ferrous gluconate)            TAB. 900055-C       Nutritional support for the                  300mg        Tablets
                                                        prevention of anemia
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
                                                        Nutritional support for the                  300mg        Tablets
Iron (Ferrous sulphate)             TAB. 900093-C       prevention of anemia
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Zinc (Gluconate)                    TAB. 900037-C       Supports immune health                       50mg         Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

---------------------------------------------------------------------------------------------------------------------------
Multi Vitamin/Mineral  Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Children's  Complete Chewable       TAB. 90005-U        Provides daily nutritional support           multi        Tablets
Multiple Vitamins & Minerals
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Multiple Vitamins                   TAB. 900031-C       Provides daily nutritional support           multi        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Multiple Vitamins plus Iron         TAB. 900023-C       Provides daily nutritional support           multi        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Mulit Vitamin & Mineral             TAB. 900091-C       Provides daily nutritional support           multi        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Multiple Vitamins & Minerals 50 +                                                                    multi        Tablets
w/Lutien                            TAB. 900109-C       Provides daily nutritional support
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Multivitamin Forte
w/Lutein (25                                                                                         multi        Tablets
Multiple Vitamins & Minerals)       TAB. 900113-C       Provides daily nutritional support
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Prenatal Vitamin                    TAB. 900089-C       Provides daily nutritional support           multi        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------

--------------------------------------------------------------------------------------------------------------------------
Other Products
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
Product                             Product Number      Slogan                                     Activity        Form
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Phasoelamine                                                                                        500 mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
Phasoelamine                                                                                        500 mg        Tablets
----------------------------------- ------------------- --------------------------------------- ---------------- ----------
</TABLE>
                                       18
<PAGE>

     Summary Plans

     We have had nominal revenues since our inception. Our goal is to launch our
King of Herbs and Taoist Medicinal product lines and our Vitamins and Supplement
product line over the next six to twelve months, provided that we are successful
raising at least $5 million of financing during the next three to six months.
All of the products for our three product lines are fully developed. We
currently outsource our manufacturing to third parties. We anticipate that we
will generate revenues from sales of our herbal supplement products (1) through
our corporate website, www.chinahealthholding.com that was initially launched in
May of this year and our e-commerce website, www.thechinahealth.com that we
anticipate launching in early 2006, (2) through the establishment of third party
retail and wholesale distribution agreements, and (3) through the establishment
of company-owned retail stores and franchises in major cities in North America
and the People's Republic of China. Our management will attempt to work to
negotiate and enter into retail and wholesale distribution agreements for our
products over the next six to twelve months. We will also attempt to open retail
outlets in large cities in North America, Europe and the People's Republic of
China over the next five years. We have not yet located any sites to establish
retail stores, but are initially looking for locations in Beijing, Shanghai,
Nanjing and Hong Kong in the People's Republic of China and New York, Los
Angeles, San Francisco, Seattle, Las Vegas or other large cities in the United
States. We anticipate that we will open our first retail storefront in the
People's Republic of China and the United States within the next six to twelve
months. We anticipate expanding and developing our operations and sales into the
United States and the People's Republic of China, and thereafter, into regions
of Europe and Asia as we continue to grow our business.


     In the next six to eighteen months, we intend to develop and establish our
own worldwide distribution and marketing infrastructure as follows:

     Global E-Commerce: Management believes this is an immediate and low cost
     way to penetrate worldwide markets and enhance our brand recognition. Our
     e-commerce site, www.thechinahealth.com, will incorporate a wide variety of
     language, currency and payment options.

     Global Retail: We plan to establish flagship stores in key cities in North
     America, Europe and the Peoples Republic of China, including, New York,
     Toronto, Vancouver, London and Beijing.

     Global Franchise: Leveraged on our brands, we intend to open franchise
     models in each of our key target territories including North America,
     Peoples Republic of China and Europe.


     Global Distribution: We are in the process of negotiating with several
distribution companies with a view to distributing our products with the
objective of lowering the cost of distribution in certain territories.


                                       19
<PAGE>
Subsidiaries

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


(1)  China Health World Pharmaceutical Corporation


     We plan to conduct our proposed biopharmaceutical operations through China
Health World Pharmaceutical Corporation, including the development, manufacture
and commercialization of natural medications for epidemic diseases and
conditions related to diabetes mellitus, cardio-vascular and cerebral-vascular
system dysfunction and neurological disorders.


(2)  China Health World Trade Corporation


     China Health World Trade Corporation will support us in the area of
worldwide branding, marketing and distribution of our unique natural medicinal
products produced by us. This will involve multi-media marketing and
multi-channel distribution to global customers and markets in order to:

     o    Build and maintain worldwide brand recognition of our products;

     o    Establish global market penetration utilizing global
          infrastructure/distribution/sales channels worldwide; and

Employ uniform market strategy to create worldwide market recognition of our
brands.

Manufacturing

     We have entered into agreements with two manufacturers who will produce all
of our requirements for our three product lines. Canadian Phytopharmaceuticals
Corp. will process the raw materials that go into our product lines. GFR Pharma
Ltd. will handle the packaging of the final products for all of our product
lines. Eventually we hope to establish our own manufacturing facility in British
Columbia, Canada. Once we are able to manufacture our own products, we will be
able to more efficiently control our costs and quality and better protect our
trade secrets.

     Canadian Phytopharmaceuticals Corp. Manufacturing Agreement. On December
18, 2005, our wholly owned subsidiary, China Health World Trade Corporation
entered into a Manufacturing Agreement with Canadian Phytopharmaceuiticals Corp.
("Canadian Phyto"), a British Columbia manufacturing company. This Agreement
replaced the agreement dated February 9, 2004 which was entered into between us
and Canadian Phyto with the same terms and conditions. Canadian Phyto uses
computerized HP1100 High Performance Liquid Chromatography instruments, to
produce consistency in the products it manufactures. Canadian Phyto will procure
components, materials, equipment and other supplies, and manufacture, assemble
and test products pursuant to detailed written specifications which are provided
by China Health Holding and accepted by Canadian Phyto. Canadian Phyto is
required to keep restricted all confidential terms, exclusive rights, patents,
trade secrets and other intellectual property which has been provided to
Canadian Phyto by China Health Holding. The Manufacturing Agreement with
Canadian Phyto does not contain any exclusivity provisions.

                                       20
<PAGE>
     Canadian Phyto has agreed to set the price for products to be manufactured
from time to time through blanket purchase orders issued by China Health Holding
and accepted by Canadian Phyto. Until the purchase price for manufactured
products has been paid to Canadian Phyto, Canadian Phyto will retain a security
interest in the products that have been delivered to China Health Holding and
any proceeds therefrom. The Manufacturing Agreement with Canadian Phyto may be
terminated by either party for any reason, but if terminated by Canadian Phyto
we must be provided at least 120 days prior written notice. If we are notified
promptly in writing and given sole control of the defense and all related
settlement negotiations, we must defend Canadian Phyto from any claim or action
and must indemnify Canadian Phyto from any loss, damage or injury, including
death, which arises from any alleged defect of any of our products.

     GFR Pharma Ltd. Manufacturing Agreement. On April 8, 2004, we entered into
a Manufacturing Agreement with GFR Pharma Ltd., a British Columbia company. GFR
Pharma is a full service private label, Canadian Good Manufacturing Process
(GBP) facility that specializes in producing over-the-counter products and
natural source products. GFR Pharma provides formulating, blending, packaging,
product testing, technical support, market research, label design and regulatory
information support to its customers. GFR Pharma manufactures and supplies
products through its GFR Private Label Program to a variety of customers similar
to products that GFR Pharma will supply to China Health Holding. Any formulas
owned by China Health Holding for products manufactured by GFR Pharma will
remain the exclusive property of China Health Holding. Further, Neither party
may, without the prior consent of the other party, directly or indirectly,
disclose any confidential or proprietary information or intellectual property
relating to the business affairs of the other party, including but not limited
to GFR Pharma's formulas and China Health Holding's formulas. The Manufacturing
Agreement with GFR Pharma does not contain any exclusivity provisions.

     The term of this Manufacturing Agreement is for five years, with an option
of both parties to renew for another five years upon written notice given at
least ninety days before expiration of the term. GFR Pharma has agreed to
manufacture certain products for our three products lines at prices to be agreed
upon from time to time in the future. If the parties are not able to agree on
prices and minimum order amounts for a particular product, then we have the
right to have the product manufactured by another company. The manufacturing
time may vary for each product from one to ten weeks, depending on the type of
product and the quantity ordered. China Health Holding is responsible for any
damages, directly or indirectly related to: (a) all formulas owned by China
Health Holding; (b) the design, content, description, ingredient listing and
layout of all labels supplied by China Health Holding; (c) any patent violations
where the product formulation was provided by China Health Holding; and (d) any
breach of the Manufacturing Agreement. GFR Pharma warrants that the products
manufactured by it will meet China Health Holding's specifications. In addition,
GFR Pharma is responsible for any damages, directly or indirectly related to:
(a) contamination of ingredients in any products manufactured by GFR Pharma
beyond that permitted by applicable laws; (b) all formulas owned by GFR Pharma;
(c) non-compliance with any laws, ordinances, regulations or requirements of any
federal, provincial, municipal or other authority in the manufacture of products
by GFR Pharma; (d) incorrect labeling of ingredients contained in the products;
(e) violation of any patents in relation to products where the formulation was
created by GFR Pharma; and (f) any breach of the Manufacturing Agreement. GFR
Pharma and China Health Holding are each required to maintain comprehensive
bodily injury, property damage and product liability insurance applying to their
respective operations and any of their employees or agents for an amount of not
less than $2,000,000 per occurrence or such higher amount that the other party
reasonably requires, with a deductible of no more than $5,000, during the term
of the Manufacturing Agreement.

                                       21
<PAGE>
     If either party materially defaults on the terms of the Manufacturing
Agreement, the non-defaulting party may give notice to the defaulting party to
remedy the default. The defaulting party thereafter has 30 days to remedy the
default. In the event the defaulting party does not remedy the default within
such period, the non-defaulting party has the right to terminate the
Manufacturing Agreement upon seven days written notice to the defaulting party.
Notwithstanding these notice provisions, in the event of bankruptcy or
insolvency of the defaulting party, or the assignment of the Manufacturing
Agreement without the consent of the other party, the Manufacturing Agreement
may be terminated immediately.

Market Analysis

     According to the Natural Marketing Institute, which monitors consumer
trends in the marketplace, demand for dietary supplements corresponds with a
strategic shift in how consumers view health and wellness. Surveys find that the
majority of Americans rely on dietary supplements to maintain good health. More
than ever before, consumers feel empowered to manage their health and are either
actively using supplements or are researching information about them. This is
supported by research from the Dietary Supplement Information Bureau that found
that three in five consumers (59%) take supplements on a regular basis.

     A number of drivers explain the overall growth of the industry, including
consumers looking for more natural health remedies, Baby Boomers seeking
remedies to slow the aging process, a trend towards self-medication rather than
a reliance on increasingly expensive mainstream medicine, and a public that was
receptive to studies and other information that purported to show the benefits
of daily vitamin and mineral use.

     According to Health Strategy Consulting LLC ("HSC"), the global nutrition
market exceeded $170 billion in 2003. Of the global nutrition market, the
dietary supplements and natural remedies represented approximately $60.1
billion, or 35% of retail sales during 2003. Within the U.S.,
vitamins/multi-vitamins accounted for the largest piece of the market, 33%, or
$6.14 billion in 2002. The second largest segment, herbals/botanicals, accounted
for 23% of the US market in 2002 at $4.2 billion.

     Specialty supplements, along with sports nutrition and meal supplements,
are the bright spots in the US dietary supplement market, reports HSC. During
2002, specialty supplements recognized 8% growth, closely followed by meal
supplements and sports nutrition, each experiencing 7% growth during that year.
The US specialty supplements market was valued at $2.3 billion in 2002 or
roughly 12% of the US dietary supplement market.
<TABLE>
<CAPTION>
           US Dietary Supplements Markets (in millions) Consumer Sales, All Channels
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
      Category               2000              2001              2002              CAGR        Projected Growth
                                                                               1997 - 2002       2002 - 2005
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S>                         <C>               <C>               <C>                 <C>              <C>
      Vitamins              5,970             6,020             6,140               3%               1-3%
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
   Multi-Vitamins           3,100             3,190             3,254               4%               2-4%
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
 Herbals/ Botanicals        4,120             4,180             4,260               4%               1-2%
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
  Sports Nutrition          1,590             1,730             1,851               9%               6-9%
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
      Minerals              1,350             1,390             1,460               7%               4-6%
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
  Meal Supplements          2,070             2,310             2,472               8%               6-9%
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
  Specialty / Other         1,940             2,130             2,300              15%              6-10%
                            -----             -----             -----              ---              -----
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
        Total              17,040            17,760            18,482               6%               3-5%
                           ======            ======            ======              ==               ====
---------------------- ----------------- ----------------- ----------------- ----------------- -----------------
CAGR - Capitalized Annual Growth Rate              Source: Health Strategy Consulting LLC
                                                   (http: //www.health-strategy.com)
</TABLE>
                                       22
<PAGE>
Competition

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

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


Global Marketing and Sales Strategy

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

     1. Global E-Commerce Infrastructure - We intend to target customers through
our e-commerce website www.thechinahealth.com. We intend to be able to offer our
neutraceutical and pharmaceutical product lines on its e-commerce website within
the next six to twelve months. We are currently working to establish and enhance
our website to be capable of handling retail transactions with multiple payment
forms (i.e., credit card, cheque and alternative payment systems), in multiple
currencies and in multiple languages. The E-Commerce Infrastructure will offer
complete online selling features which are fully integrated with our global IT
infrastructure that balances flexibility. Our website will offer both
functionality and integration with global customers and trading partners.

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

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

                                       23
<PAGE>
     2. Global Retail and Wholesale Distribution - We believe that one of the
fastest ways to penetrate the neutraceuticals market is to secure distribution
through an established system of retailers in order to take advantage of their
current client base. We are currently in the process of negotiating with several
distribution companies that we hope will distribute our products. We believe
that one of the fastest ways to penetrate the neutraceuticals market is to
secure distribution through an established system of retailers in order to take
advantage of their current client base. We are in negotiation with several
distribution companies with a view to distributing our products.


     3. Global Retail and Franchise Infrastructure and Storefronts - We intend
to develop a proprietary enhanced Global Retail and Franchise IT Software
Infrastructure and System to support the launch of our intended global retail
and franchising operations. The System is expected to be fully operational
within six (6) to eighteen (18) months.

     The new Global Retail Infrastructure, known as "FUSION" will offer a fully
integrated global retail solution. Its integration platform will take the
uncertainty out of customer and inventory management, enabling our employees to
perform global customer maintenance, process account payments and view a
customer's sales history right at the register to gain valuable insight into our
customer's purchasing habits, loyalty, and spending history to enhance our
Global Customer Relationship Management (CRM).

     The Global Retail IT Infrastructure will have the comprehensive ability to
provide and accommodate us with customer support for a single register at one
location to a multi-register, multi-global retail chain of stores
infrastructure. It will also offer us the comprehensive ability to offer
integration , global pricing management, integrated global remote communication
capability between stores, global multi-currency cash management and global
shipping management.

     We intend to leverage our planned global fusion retail solution to develop
and expand and extend throughout our global enterprise with strategic inventory
control, efficient operations, streamlined communications and the overall
management of our global retail and franchise business within 1 to 5 years. Our
planned new Global Retail and Franchise Infrastructure and System will enable us
to support rapid global growth and allow us to have inventory management and CRM
tools which will provide us with the competitive advantage to create
efficiencies as we expand throughout North American and internationally.

     4. Establish Regional Sales Teams - As we grow, we intend to establish
regional sales teams in Canada, the United States and ultimately
internationally. The role of these sales teams will be to work with distributors
and retailers in their regions.

     5. Media Advertising - We intend to engage in more advertising to help
establish our business in the neutraceuticals market through an intensive North
American media and advertising campaign. We expect to spend approximately
$200,000 on media and advertising over the next year to meet these objectives.

     6. Trade Shows and Seminars - We expect to participate in seminars related
to neutraceuticals, alternative medicine and Chinese medicine.


                                       24
<PAGE>
Research and Development

     Our research and development program is focused on the development and
commercialization of natural medicinal products to prevent and help treat
epidemic diseases and conditions in the areas of diabetes mellitus,
cardiovascular and cerebral-vascular system dysfunctions, neurological disorders
and immunological disorders. We have worked in the past through informal
research and development alliances with ShangHai Chinese Western Medical
Vascular Disease Research Institute, ShangHai XiJiYe TCM Hospitals, Beijing TCM
Research Institute in the People's Republic of China and certain Research
Institute scientists in the People's Republic of China. We have established
further research and development alliance with WangJing Hospital and WangJing
Hospital of China Academy of Chinese Medical Sciences, BeiJing, PR China.


Intellectual Property

     We own the rights to the 134 100% natural herbal medicinal products that
comprise our King of Herbs and Taoist Medicine product lines.


Recent Developments

     On January 16, 2006, we entered into a Letter of Intent, effective as of
January 27, 2006, with WangJing Hospital and WangJing Hospital of China Academy
of Chinese Medical Sciences, for the worldwide development of the China
International University of Traditional Chinese Medicine and the University
Hospital for Traditional Chinese Medical Sciences (the "Project"). WangJing
Hospital and WangJing Hospital of China Academy of Chinese Medical Sciences
consist of the Affiliated Hospital of Beijing College of Acupuncture and
Orthopedics, the Orthopedic Department of Beijing College of Acupuncture and
Orthopedics and the Institute of Orthopedics and Traumatology of China Academy
of Traditional Chinese Medical Sciences.

     Pursuant to the Letter of Intent, the parties agreed to pursue the
co-development of the China International University of Traditional Chinese
Medicine and the University Hospital for Traditional Chinese Medical Sciences on
a worldwide basis during the five (5) year period following execution of the
Letter of Intent. Further, WangJing Hospital and WangJing Hospital of China
Academy of Chinese Medical Sciences have agreed to provide us with full
intellectual and scientific and medical and technical support for further
development of the Project, while we agreed to be responsible for further
investment capital and business development for the Project.

     On February 19, 2006, we entered into a Letter of Intent, effective as of
February 28, 2006, with Shaanxi WanAn Pharmaceutical Co. Ltd. for the proposed
acquisition by us of 51% or more of Shaanxi WanAn Pharmaceutical Co. Ltd.
Pursuant to the letter of intent, Shaanxi WanAn Pharmaceutical Co. Ltd. has
agreed to offer us first refusal rights and legal exclusive rights for further
acquisition of 51% or more Shaanxi WanAn Pharmaceutical Co. Ltd. in the next 12
months. The completion of the acquisition is subject to the negotiation and
execution of a definitive acquisition agreement, as well as to the completion of
full legal and financial due diligence, including the determination of the
valuation of Shaanxi WanAn Pharmaceutical Co. Ltd., and the completion and
delivery of audited financial statements of Shaanxi WanAn Pharmaceutical Co.
Ltd. Shaanxi Wanan Pharmaceutical Co., is a P.R. China State Drug Administrative
Certified ISO13485 (1996) and ISO9001 (2000) pharmaceutical manufacturer and
research & development company, based in Xian, Shaanxi, China.

                                       25
<PAGE>

Government Regulation

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

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

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

                                       26
<PAGE>
     In addition, DSHEA provides that so-called "third-party literature," e.g.,
a reprint of a peer-reviewed scientific publication linking a particular dietary
ingredient with health benefits, may be used "in connection with the sale of a
dietary supplement to consumers" without the literature being subject to
regulation as labeling. Such literature must not be false or misleading; the
literature may not "promote" a particular manufacturer or brand of dietary
supplement; and a balanced view of the available scientific information on the
subject matter must be presented. If the literature fails to satisfy each of
these requirements, we may be prevented from disseminating such literature with
our products, and any dissemination could subject our product to regulatory
action as an illegal drug.

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

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

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

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

Employees

     We currently employ six full time employees and thirty part-time
employee/consultants. None of our employees are covered by a collective
bargaining agreement. We consider relations with our employees to be good.


                                       27
<PAGE>
Item 2. Description of Property.

     On October 20, 2004, we signed a lease for office space at 666 Burrard St.,
Suite 600, Park Place, Vancouver, British Columbia, Canada V6C 2X8. This lease
begins January 1, 2005 and is for a term of 12 months, with automatic renewals
for subsequent twelve-month terms unless a notice of termination is delivered in
writing by either party ninety days prior to the anniversary date of the
termination date of the lease agreement. The monthly rent for the first 12-month
term of the lease is $1,200 per month. Rent for subsequent terms will be at
market rates.

     We also have entered into an agreement with Nevada Corporate Headquarters,
Inc. for a term of one year. Pursuant to the Agreement, we maintain a business
office address at 101 Convention Center Drive, Suite 700 Las Vegas, NV
89107-2001, telephone 1-877-883-0979. In addition, Nevada Corporate Headquarters
has agreed to provide us with office support services, which includes telephone
answering services, conference and meeting room facilities and mail and package
handling services.


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 covered by this report.



                                       28
<PAGE>
                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

Market Information

Commencing April 18, 2005, our common stock trades on the Over the Counter
Bulletin Board ("OTCBB") under the symbol "CHHH." The aggregate market value of
the voting and non-voting common equity held by our non-affiliates, based upon
the average bid and asked price of such common equity on March 17 2005 as
reported by the OTCBB, was approximately $2,670,434.96. This number excludes
shares of common stock held by each officer and director of our Company and by
each person who owns 5% or more of the outstanding common stock, as these
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.

     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
April 18 2005 to March 1 2006. Prior to April 18, 2005, there was no "public
market" for shares of our common stock. The OTCBB quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.

2005                                                          High        Low
First Quarter ended March 31, 2005                            n/a         n/a
Second Quarter ended June 30, 2005                            n/a         n/a
Third Quarter ended September 30, 2005                     $ 1.80      $ 0.26
Fourth Quarter ended December 31, 2005                      0.495        0.13

2006
First Quarter (1)                                           0.252        0.10

(1) As of March 1, 2006

Holders

     As of March 17, 2006, there were 60,214,551 shares of our common stock
issued and outstanding and 1,000,000 shares of Series "A" Preferred Stock
outstanding. There are approximately 123 stockholders of record of our common
stock and 1 holder of our Series "A" Preferred Stock.

     As of March 17, 2006, 14,229,175 shares of our common stock were subject to
outstanding options to purchase our common stock, 1,180,000 shares of our common
stock were subject to outstanding warrants to purchase our common stock and
1,000,000 shares of our preferred stock are subject to outstanding warrants to
purchase our preferred stock.

Dividends

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

                                       29
<PAGE>
     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 320,000,000 shares of capital
stock, par value $.001 per share, of which 300,000,000 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.

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 therefor. 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.
The Certificate of Designation authorizes us 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 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.

                                       30
<PAGE>
     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 1,000,000
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, 2005.

                      EQUITY COMPENSATION PLAN INFORMATION
<TABLE>
<CAPTION>
------------------------------------ ------------------------ ----------------------- ---------------------------
Plan category                        Number of securities     Weighted average        Number of securities
                                     to be issued upon        exercise price of       remaining available for
                                     exercise of              outstanding options,    future issuance under
                                     outstanding options,     warrants and rights     equity compensation plans
                                     warrants and rights                              (excluding securities
                                                                                      reflected in column (a)
------------------------------------ ------------------------ ----------------------- ---------------------------
                                               (a)                     (b)                       (c)
------------------------------------ ------------------------ ----------------------- ---------------------------
<S>                                             <C>                     <C>                       <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-
------------------------------------ ------------------------ ----------------------- ---------------------------
</TABLE>
                                       31
<PAGE>
Our Board of Directors adopted the China Health Holding, Inc. 2005 Incentive
Stock Plan (the "Plan"). On June 24, 2005, we filed with the SEC a form S-8
Registration Statement to register up to 3,900,000 shares of Common Stock
underlying options issuable pursuant tot 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

     The 2005 Incentive Stock Plan has initially reserved 3,900,000 shares of
common Stock for issuance. Under the 2005 Incentive Stock Plan, options may be
granted which are intended to qualify as Incentive Stock Options ("ISOs") under
Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not
("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In
addition, direct grants of stock or restricted stock may be awarded.

Purpose

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

Administration

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

Eligibility

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

Terms of Options

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

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

                                       32
<PAGE>
     (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

On November 1, 2005, we granted 300,000 stock options to CRI Strategies, one of
our consultants, with an exercise price of $0.50 subject to immediate vesting.
These options expire on October 31, 2006.

On December 18, 2005 we granted 1,000,000 stock options to Joseph Zhou, one of
our scientific advisors, with an exercise price of $0.20 subject to immediate
vesting. These options expire on December 31, 2009.

On December 23, 2005 the Company granted 500,000 stock options to Jian Chong Bo,
a consultant, with an exercise price of $0.15 subject to immediate vesting.
These options expire on December 22, 2007.

                                       33
<PAGE>
On December 23, 2005 the Company granted 227,753 stock options to Dick Wu, one
of our directors, with an exercise price of $0.15 subject to immediate vesting.
These options expire on December 22, 2006.

On December 23, 2005 the Company granted 1,000,000 preferred stock options to
Julianna Lu, our President, with an exercise price of $0.15 subject to immediate
vesting. These options expire on December 23, 2008.

On October 17, 2005 the Company issued 10,000 shares of common stock to Philip
Yue, a consultant, with a fair value of $0.37 per share for consulting fees.

On October 17, 2005, the Company issued 15,000 common stocks to Dick Wu, one of
our directors, with a fair value of $0.37 per share for consulting fees.

On October 17, 2005, the Company issued 50,000 shares of common stock to Xiao
Fei Yu, one of our directors and officers, with a fair value of $0.37 per share
for management fees.

On October 17, 2005, the Company issued 50,000 shares of common stock to Mac
Page, a consultant, with a fair value of $0.37 per share for consulting fees.

On October 17, 2005, the Company issued 50,000 shares of common stock to Yuan
Chun Ma, one of our scientific advisors, with a fair value of $0.37 per share
for consulting fees.

On October 18, 2005, the Company issued 135,000 shares of common stock to James
Simpson upon the exercise of options at $0.10 per share.

On October 24, 2005, the Company issued 5,000 shares of common stock to Ajay
Caleb, a consultant with a fair value of $0.37 per share for consulting fees,

On November 1, 2006, the Company issued 300,000 shares of common stock to CRI
Strategies, one of our consultants, with a fair value of $0.25 per share for
consulting fees.

On December 18, 2005, the Company issued 100,000 shares of common stock to
Javier Del Aguila, one of our consultants, with a fair value of $0.20 per share
for consulting fees.

On December 18, 2005, the Company issued 150,000 shares of common stock to
Richard Friedman LLP, one of our consultants, with a fair value of $0.20 per
share for consulting fees.

On December 18, 2005, the Company issued 50,000 shares of common stock to Ma
Yuan Chun, one of our scientific advisors, with a fair value of $0.20 per share
for consulting fees.

On December 18, 2005, the Company issued 250,000 shares of common stock to
Joseph Zhou, one of our scientific advisors, with a fair value of $0.20 per
share for consulting fees.

On December 23, 2005 the Company issued 277,753 shares of common stock to Dick
Wu, one of our directors, with a fair value of $0.17 to settle debt.

                                       34
<PAGE>
On December 23, 2005, the Company issued 250,000 shares of common stock to Jian
Chong Bo, a consultant, with a fair value of $0.17 per share for consulting
fees.

On December 30, 2005, the Company issued 131,888 common stocks James Simpson, a
consultant, with a fair value of $0.10 per share for consulting fees.

On December 22, 2005, the Company issued 1,000,000 shares of Series A Preferred
Stock with a fair value of $0.15 per share to settle debt of $150,000 owed to
our President, Julianna Lu.

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.

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.


                                       35
<PAGE>
     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.

Background

China Health Holding, Inc. is a development stage business that was formed in
2002 for the purpose of manufacturing, marketing and distributing proprietary
natural medicinal products. We have had nominal revenues since our inception. We
currently market and distribute products in Canada through our King of Herbs
product line. We also plan on developing a Taoist Medicine product line and a
Vitamins and Supplements product line over the next twelve months. All of the
products for the three product lines are fully developed and we expect to launch
the Taoist Medicine and Vitamins and Supplements product lines within the next
twelve months. All of our manufacturing is currently outsourced to third
parties. We plan to generate revenues by sales of our herbal supplement products
(1) through a website that is currently under construction, (2) through retail
and wholesale distributors, and (3) through the establishment of retail stores
in major cities in North America. While all of our current operations and sales
are in Canada, we anticipate expanding our sales into the United States over the
next six to twelve months and, thereafter, into regions of Europe and Asia.

RESULTS OF OPERATIONS

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

We had a net loss of $3,676,679 for the fiscal year ended December 31, 2005 as
compared to a net loss of 2,098,276 for the fiscal year ended December 31, 2004.
The net loss for the fiscal year ended December 31, 2005 consisted primarily of
$1,491,753 of consulting fees, $1,377,287 of research and development expenses,
$391,396 of management fees, $216,061 of professional fees, $68,837 of
advertising and promotional expenses, $47,344 of interest and bank charges,
$20,888 in rent, $17,749 of travel expenses, $12,913 of office expenses, $34,623
of investor relations related travel costs, $3,894 in depreciation expenses and
$2,477 of vehicle expenses. The increase in net loss was primarily the result of
an increase in operating expenses, specifically an increase in consulting fees
and research and development costs. The increase in research and development
costs reflects our ongoing plan to invest in product development and new product
lines.

Sales was $1,671 for the fiscal year ended December 31, 2005 as compared to
$7,305 for the fiscal year ended December 31, 2004. The decrease is attributed
primarily to delayed corporate financing and limited marketing and sales
budgets.

Other Income (Expenses) was $7,117 for the fiscal year ended December 31, 2005
as compared to $(212,171) for the fiscal year ended December 31, 2004. The
decrease is attributed primarily to the impairment of licensing rights of
$182,874 recognized during the fiscal year ended December 31, 2004 compared to
nil for the fiscal year ended December 31, 2005.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2005, we had cash of $14,887. Our current liabilities as of
December 31, 2005 aggregated $618,424. As of December 31, 2005, we had a working
capital deficiency of $598,411 and an accumulated deficit of $5,996,301. In
order to sustain our current level of operations, we will need to raise at least
$ 1million over the next six to twelve months. In order to expand our business,
fund future development and begin marketing and selling our three product lines
we will need to raise at least $5 million over the next six to twelve months. We
intend to seek outside debt and equity financing, to the extent that such
funding is available under reasonable terms and conditions. We have not yet
sought any commitments for such financing and no assurance can be given that
additional financing will be available, or if available, will be on acceptable
terms. If adequate working capital is not available, we may be forced to curtail
or cease operations.

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<PAGE>
As of December 31, 2005, we had outstanding loans to our President Julianna Lu
and Vice President XiaoFei Yu of $463,798 and $111,991, 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.

We have no off balance sheet arrangements as defined by Item 303(c) of
Regulation S-B.

Future Development

We expect to focus our resources over the next six to twenty four months on
expanding the scope of our three product lines, and expanding our business
operations into the People's Republic of China, the United States and Europe. To
expand our operations and business, we are implementing and developing our
worldwide marketing and distribution strategy and infrastructures for our
products and business development, and we are developing and implementing our
worldwide e-commerce infrastructure, including our e-commerce website at
www.thechinahealth.com. Our worldwide e-commerce website will have
multi-language and multi-currency capabilities. Our worldwide e-commerce
infrastructure is expected to also include media advertising and distribution
agreements in multiple countries.

We are developing a proprietary enhanced Global Retail and Franchise
Infrastructure and System to support the launch of our global retail and
franchising operations. The System is expected to be fully operational in about
twenty four months. The new Global Retail Infrastructure will enable our
employees to perform global customer maintenance, process account payments and
view a customer's sales history.

As we attempt to grow, we intend to establish regional sales teams in the United
States and ultimately internationally. These sales teams will work with
distributors and retailers in their regions to promote and sell our products.
Also, together with marketing and sales consultants we will attempt to develop a
marketing plan to promote our brand name and product lines worldwide. Currently,
we do not have any agreements with retail or wholesale distributors. Our
management will attempt to work to negotiate and enter into retail and wholesale
distribution agreements for our products over the next six to twelve months. We
will also attempt to open retail outlets in large cities in North America,
Europe and the People's Republic of China over the next five years. We have not
yet located any sites to establish retail stores, but are initially looking for
locations in New York, Los Angeles, San Francisco, Seattle, Las Vegas or other
large cities in the United States. We anticipate that we will open our first
retail storefront in the United States within the next six to twelve months.

We are in the process of identifying merger and/or acquisitions candidates in
the Peoples Republic of China and worldwide as part of our growth plan to secure
a strong future. Our acquisition strategy highlights our updated growth strategy
to accrete value to our shareholders through the strategic combination of assets
and net income and natural medicinal products and technologies and established
China market with major natural medical companies and pharmaceutical companies
in China and throughout the world. Growth by acquisition is an important
component of our updated business model. As the Chinese government policy
continues to change and move towards privatization of businesses, our focus on
the emerging opportunities in China will primarily focus on small and
medium-sized enterprises. Management believes that our growth strategy will
enable the company to secure a strong future and a powerful position in the
global natural medicinal industry and pharmaceutical industry.

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<PAGE>
If we are successful in raising $5 million of financing in order to expand our
business and fund future development, we anticipate the following expenses over
the next twelve months: (a) $150,000 to develop our Internet website and
e-commerce system; (b) $150,000 for media advertising to promote our brand name;
(c) $200,000 for our research and development program; (d) $2,000,000 to
establish our first retail outlet in the United States, including an integrated
inventory management/ manufacturing/sales computer system; (e) $200,000 for an
investor relations program; (f) $500,000 for professional and consultant fees;
and (g) $1,800,000 for general working capital, including product development,
inventory, and general and administrative expenses. We do not expect to purchase
or sell significant equipment or to significantly increase the number of our
employees over the next twelve months.

If we are only successful in raising $1 million of financing to sustain our
current level of business operations, we anticipate the following expenses over
the next twelve months: (a) $20,000 to develop our Internet website and
e-commerce system; (b) $200,000 for media advertising to promote our brand name;
(c) $60,000 for our research and development program; (d) $250,000-$400,000 to
begin the process of establishing our first retail outlet in the United States;
(e) $50,000 for an investor relations program; (f) $150,000-$250,000 for
professional and consultant fees; and (g) $200,000-$300,000 for general working
capital, including product development, inventory, and general and
administrative expenses. We do not expect to purchase or sell significant
equipment or to significantly increase the number of our employees over the next
twelve months.

Research and Development

We expect to pay approximately $200,000 over the next six months to scientific
consultants in the People's Republic of China to identify and work with new
product candidates held by third parties that we will ultimately attempt to
acquire the rights to. Each of the formulations would be considered by the FDA
to be unapproved new drugs and will require approval by the FDA or foreign
regulators before we can sell them. If approval of such products by the FDA or
foreign regulators is delayed or cannot be obtained, we will be forced to delay
our plans to market and sell these products. Any delay could adversely affect
our operations.

As part of our growth strategy, we are currently in negotiations with respect to
a number of product candidates that we intend to license or acquire for
development and commercialization although no formal agreements with respect to
any such proposed products have been entered into. 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 product candidates on terms that we find
acceptable, or at all. If we are successful acquiring such product candidates,
we will be required to raise additional capital for research and development,
regulatory review and marketing efforts associated with such products. This will
require substantial investment before our new product candidates could provide
us with any revenue. We intend to seek outside debt and equity financing, to the
extent that such funding is available under reasonable terms and conditions, in
order to fund our research and development efforts. We have not yet sought any
commitments for such financing and no assurance can be given that additional
financing will be available, or if available, will be on acceptable terms.

We also plan to add VG-ALLERGY, VG-EYE and VG-ANTI-TUMOR to the products in our
King of Herbs product line. We acquired the rights to each of these products
under a purchase agreement dated May 1, 2004 with Julianna Lu, our founder and
principal executive officer, and Xiao Fei Yu, our President and one of our
directors. VG-ALLERGY is a product designed to reduce allergic reactions of the
human body. VG-EYE is formulated to prevent deterioration of eyesight.
VG-ANTI-TUMOR is formulated specifically to prevent cancerous growths for cancer
patients who are undergoing chemotherapy treatment. Each of these products would
be considered an unapproved new drug by the FDA and will require an approved New
Drug Application before the products can be marketed in the United States. No
clinical trials have been conducted for these products. The New Drug Application
process is expensive, lengthy and rigorous requiring extensive nonclinical and
clinical trials to be successfully conducted. We intend to seek outside debt and
equity financing, to the extent that such funding is available under reasonable
terms and conditions, in order to fund this process. We have not yet sought any
commitments for such financing and no assurance can be given that additional
financing will be available, or if available, will be on acceptable terms.
Additionally, there is no guarantee that the FDA would accept the data or
approve any New Drug Applications for these products. If approval of these
products by the FDA or foreign regulators is delayed or cannot be obtained, we
will be forced to delay our plans to market and sell these products to
consumers.

                                       38
<PAGE>
Recently issued accounting pronouncements

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment", which
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. A key provision of this
statement is the requirement of a public entity to measure the cost of employee
services received in exchange for an award of equity instruments (including
stock options) based on the grant date fair value of the award. That cost will
be recognized over the period during which an employee is required to provide
service in exchange for the award (i.e., the requisite service period or vesting
period). This standard becomes effective for the Company for the interim period
beginning after December 15, 2005. Management is currently evaluating the impact
of this standard on the Company's financial condition and results of operations.

In March 2005, the SEC staff issued Staff Accounting Bulletin ("SAB") No. 107,
"Share based payment", to give guidance on the implementation of SFAS 123R. The
Company will consider SAB No. 107 during implementation of SFAS No. 123R.

In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47, "Accounting
for Conditional Asset Retirement Obligations". Under the provisions of FIN No.
47, the term conditional asset retirement obligation as used in SFAS No. 143,
"Accounting for Asset Retirement Obligations", refers to a legal obligation to
perform an asset retirement activity in which the timing and/or method of
settlement are conditional on a future event that may or may not be within the
control of the entity while the obligation to perform the asset retirement
activity is unconditional. Accordingly, an entity is required to recognize a
liability for the fair value of a conditional asset retirement obligation if the
fair value of the liability can be reasonably estimated. The fair value of a
liability for the conditional asset retirement obligation is required to be
recognized when incurred--generally upon acquisition, construction, or
development and/or through the normal operation of the asset. The Company has
adopted FIN No. 47 as of December 31, 2005. Adoption of this pronouncement did
not have a significant effect on the 2005 financial statements, and management
does not expect this pronouncement to have a significant effect on our future
reported financial position or earnings.

In May 2005, the Financial Accounting Standards Board ("FASB") issued SFAS No.
154, "Accounting Changes and Error Corrections - A Replacement of APB Opinion
No. 20 and SFAS No. 3". SFAS No. 154 changes the requirements for the accounting
for and reporting of a change in accounting principle and applies to all
voluntary changes in accounting principle. It also applies to changes required
by an accounting pronouncement in the unusual instance that the pronouncement
does not include specific transition provisions. SFAS No. 154 requires
retrospective application to prior periods' financial statements of changes in
accounting principle, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. The provisions
of SFAS No. 154 are effective for accounting changes and correction of errors
made in fiscal years beginning after December 15, 2005. The adoption of this
standard is not expected to have a material effect on the Company's results of
operations or financial position.

In July 2005, the FASB issued SFAS No. 154, "Accounting for Changes and Error
Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3".
Under the provisions of SFAS No. 154, a voluntary change in accounting principle
requires retrospective application to prior period financial statements, unless
it is impracticable to determine either the period-specific effects or the
cumulative effect of the change. A change in depreciation, amortization, or
depletion method for long-lived, nonfinancial assets must be accounted for as a
change in accounting estimate effected by a change in accounting principle. The
guidance contained in APB No. 20 for reporting the correction of an error in
previously issued financial statements and a change in accounting estimate was
not changed. The Company will implement this new standard beginning January 1,
2006. This standard is not expected to have a significant effect on our future
reported financial position or results of operations.

                                       39
<PAGE>
In November 2005, the FASB issued Staff Position ("FSP") FAS115-1/124-1, "The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments", which addresses the determination as to when an investment is
considered impaired, whether that impairment is other than temporary, and the
measurement of an impairment loss. This FSP also includes accounting
considerations subsequent to the recognition of an other-than-temporary
impairment and requires certain disclosures about unrealized losses that have
not been recognized as other-than-temporary impairments. The guidance in this
FSP amends FASB Statements No. 115, Accounting for Certain Investments in Debt
and Equity Securities, and No. 124, Accounting for Certain Investments Held by
Not-for-Profit Organizations, and APB Opinion No. 18, The Equity Method of
Accounting for Investments in Common Stock. This FSP is effective for reporting
periods beginning after December 15, 2005. Management does not believe the
adoption of this FSP will have a material impact on our future reported
financial position or results of operations.

RISK FACTORS

Our business involves a high degree of risk. Any of the following risks could
materially and adversely affect our business, financial condition, and results
of operations. This could cause the trading price of our common stock to
decline, with the loss of part or all of an investment in our common stock.

RISKS RELATED TO OUR FINANCIAL CONDITION

OUR FINANCIAL STATUS CREATES DOUBT WHETHER WE WILL CONTINUE AS A GOING CONCERN.

We reported net losses totaling of $3,676,679, $2,098,276, $149,673 , December
31, 2005, December 31, 2004 and December 31, 2003, respectively. As of December
31, 2005 we had a working capital deficiency of $598,411 (current assets less
current liabilities) and an accumulated deficit of $5,996,301. With our current
resources we expect to be able to satisfy our cash requirements through March
2007. In order to expand our current business operations, fund future
development and market and sell our three existing product lines we will need to
raise at least $5 million in financing over the next twelve months. We intend to
raise additional working capital either through private placements, public
offerings and/or bank financing. There are no assurances that we will be able to
achieve a level of revenues adequate to generate sufficient cash flow from
operations or obtain additional financing through private placements, public
offerings and/or bank financing necessary to support our working capital
requirements. To the extent that funds generated from any private placements,
public offerings and/or bank financing are insufficient, we will have to raise
additional working capital. No assurance can be given that additional financing
will be available, or if available, will be on acceptable terms. These
conditions raise substantial doubt about our ability to continue as a going
concern. If adequate working capital is not available we may be forced to
discontinue operations, which would cause investors to lose the entire amount of
their investment.

WE NEED SIGNIFICANT INFUSIONS OF ADDITIONAL CAPITAL, WHICH MAY RESULT IN
DILUTION TO OUR SHAREHOLDERS' OWNERSHIP AND VOTING RIGHTS IN OUR COMPANY.

Based upon our current cash reserves and forecasted operations, we believe that
we will need to obtain at least $1 million of outside funding in order to
sustain our current business operations over the next twelve months, and at
least $5 million of outside funding in order to expand our business, fund future
development and market and sell our three existing product lines. Our need for
additional 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 until we can obtain
adequate financing. 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.

                                       40
<PAGE>
RISKS RELATED TO 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.

IF WE FAIL TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS,
COMPETITORS MAY PRODUCE AND MARKET PRODUCTS SIMILAR TO OURS. IN ADDITION, WE MAY
BE SUBJECT TO INTELLECTUAL PROPERTY LITIGATION AND INFRINGEMENT CLAIMS BY THIRD
PARTIES.

Our ability to compete effectively is dependent upon the proprietary nature of
the designs, processes, technologies and materials owned by, used by or licensed
to us. All of our intellectual property rights are based on common law and our
license agreements with Hotway Nutraceuticals Canada Co., Ltd. and from rights
to herbal supplement formulas that we obtained from our principal officers, Ms.
Julianna Lu and Mr. Xiao Fei Yu. We do not own and have not applied for patents,
trademarks or any other registrations of our intellectual properties. Although
we attempt to protect such proprietary properties, both in the United States and
in foreign countries through trade secret laws and non-disclosure agreements,
these may be insufficient. In addition, because of the differences in foreign
laws concerning proprietary rights, our products may not receive the same degree
of protection in foreign countries as they would in the United States. We may
not always be able to successfully protect or enforce our proprietary properties
against competitors, which may materially adversely affect our business.

In addition, although we do not believe that our products infringe the rights of
others and while to date we have not been subject to such claims, in the future
we may be subject to intellectual property litigation and infringement claims,
which could cause us to incur significant expenses or prevent us from selling
our products. A successful claim of trademark, patent or other intellectual
property infringement against us could adversely affect our growth and
profitability, in some cases materially. Others may claim that our proprietary
or licensed products are infringing their intellectual property rights, and that
our products may infringe those intellectual property rights. If we are found to
have infringed on the intellectual property rights of another party, licenses
for such intellectual property may not be available on favorable terms or at
all. If someone claims that our technology or products infringe their
intellectual property rights, any resulting litigation could be costly and time
consuming and would divert the attention of management and key personnel from
other business issues. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. We also
may be subject to significant damages or injunctions preventing us from
manufacturing, selling or using some aspect of our products in the event of a
successful claim of patent or other intellectual property infringement. Any of
these adverse consequences could have a material adverse effect on our business
and profitability.

                                       41
<PAGE>
WE MAY INCUR MATERIAL PRODUCT LIABILITY COSTS.

We are 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.

Over the next six to eighteen months, we anticipate launching our King of Herbs,
Taoist Medicinal and Vitamins and Supplements products lines upon the receipt of
funding. We have not yet implemented any marketing and distribution strategies.
Accordingly, we may experience a period of significant growth. While we have not
experienced problems with growth of our business in the past, 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 Acquisition is Inherently Risky.

We intend to seek to identify and develop merger and/or acquisitions candidates
in the Peoples Republic of China and worldwide as part of our growth plan to
secure a strong future.

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

     o    the potential inability to identify the companies best suited to our
          business plan;
     o    the potential inability to successfully integrate acquired operations
          and businesses or to realize anticipated synergies, economics of scale
          or other expected value;
     o    the potential need to restructure, modify or terminate customer
          relationships of the acquired company; and
     o    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.

                                       42
<PAGE>
IF WE FAIL TO ACQUIRE AND DEVELOP OTHER PRODUCTS OR PRODUCT CANDIDATES, WE MAY
BE UNABLE TO GROW OUR BUSINESS.

We license the rights to a majority of our products from outside third parties.
As part of our 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 our products. The
number of contract manufacturers with the expertise, required regulatory
approvals and facilities to manufacture our 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 our 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, we will likely be unable to meet customer demand as we
begin to market and sell our existing product lines.

THE LOSS OF OUR CURRENT MANAGEMENT TEAM COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS. IF WE ARE NOT ABLE TO RETAIN ADDITIONAL KEY PERSONNEL, OUR
BUSINESS COULD SUFFER.

Our success depends to a large degree upon the skills of our current management
team and advisors, including Ms. Julianna Lu and Mr. Xiao Fei Yu, and upon our
ability to identify, hire, and retain additional senior management, sales,
marketing, scientific, and financial personnel. Although, to date we have not
experienced problems attracting and retaining key personnel, we may encounter
such problems in the future as we grow and expand our operations. The loss of
any of our current executives, employees, or advisors or the failure to attract,
integrate, motivate, and retain additional key employees could have a material
adverse effect on our business. To our knowledge, none of our key employees has
plans to retire or leave us in the near future. We do not have "key person"
insurance on the lives of any of our management team.

                                       43
<PAGE>
RISKS RELATED TO OUR INDUSTRY

THE NUTRITIONAL SUPPLEMENTS INDUSTRY IS INTENSELY COMPETITIVE. WE HAVE MANY
WELL-ESTABLISHED COMPETITORS WITH SUBSTANTIALLY GREATER FINANCIAL AND OTHER
RESOURCES THAN US. THESE FACTORS MAY MAKE IT MORE DIFFICULT FOR US TO
SUCCESSFULLY IMPLEMENT OUR BUSINESS PLAN AND MAY ADVERSELY AFFECT OUR 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 nutraceutical
companies that we will compete with are Weider Nutrition International, Inc.,
USANA Health Sciences Inc., Nature's Sunshine Products, Inc. and Herbalife
International, Inc. We are a development stage business and the only revenues we
have received from product sales since inception were nominal and were generated
during 2004. Accordingly, we have not been operational long enough to experience
any of the above problems. However, since we are 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 ours. In addition, our competitors may be
more effective and efficient in integrating new products. We 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.

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

The FDA may attempt to regulate any of our 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 ingredient presents 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 our statements of
nutritional support as to a particular specialty supplement or permit us to
promote our specialty supplements directed at particular nutritional concerns.
We also may be unable to disseminate third-party literature in connection with
our products if the third-party literature fails to satisfy certain
requirements. In addition, the FDA could require us 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 we are 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.

                                       44
<PAGE>
     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 our 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 our products appeared on the FDA's list, or if the agency
determined there were issues concerning their safety, we 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 our 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 our products have not been evaluated
by the FDA and are not Generally Recognized as Safe, then we 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, we 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 our 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. We may not be able to comply with the new rules without
incurring additional expenses.

     Each of our 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.

     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 us, repeal
laws or regulations that we consider favorable to us 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 our 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.

                                       45
<PAGE>
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." To date there is 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 Securities and Exchange Commission 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.

                                       46
<PAGE>
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.

Not applicable.

Item 8A. Controls and Procedures.

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

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.

Item 8B. Other Information.

None.


                                       47
<PAGE>
                                    PART III

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

The following are the names and certain information regarding or current
Directors and Executive Officers:

------------------ ------- -----------------------------------------------------
         Name        Age                          Position
------------------ ------- -----------------------------------------------------
Julianna Lu           43   Chief Executive Officer, Principal Financial Officer,
                           Principal Accounting Officer, Treasurer and Chairman
                           of the Board of Directors
------------------ ------- -----------------------------------------------------
Xiao Fei Yu           43   Vice President and Director
------------------ ------- -----------------------------------------------------
Dahong Li             48   Vice President
------------------ ------- -----------------------------------------------------
Zheng-lun Fan         61   Vice President
------------------ ------- -----------------------------------------------------
Dick Wu               49   Director
------------------ ------- -----------------------------------------------------

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

Background of Executive Officers and Directors

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

Professor Xiao Fei Yu, Vice President and Director. 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 a member
of our Board of Directors since May 26, 2004 and on October 6, 2004 he was
appointed to a position as Vice President. From 1997 to Present, 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.

                                       48
<PAGE>
Dr. DaHong Li, Vice Vice President. Ph.D., MA,Sc., Dr. Li serves as our Vice
President since February 1, 2006. From 1994 to present, Dr. Li has been the
Principal of DLEX Enterprises Corporation and Vision Capital Partners, Ltd. Dr.
Li has served as the senior consultant for Dames & Moore, Inc. for various
complex engineering and construction projects Canada and overseas. Dr. Li has
served as a senior consultant to international banks on debts financing for
major infrastructure. Dr. Li graduated from University of Toronto, Toronto,
Canada (1990).

Professor Zheng-lun Fan, Vice President. During the past five years, Mr. Fan has
been a Research Fellow at Cui Yue-li Research Center of Traditional Chinese
Medicine. Mr. Fan is also a MSC, Professor, Chief Physician Research Fellow at
Cui Yue-li Research Center of Traditional Chinese Medicine, Beijing, P. R.
China. Prof. Z. Fan is an expert in Chinese medicine at the national level in P.
R. China and he has practiced Chinese medicine for more than 40 years.

Dick Wu, Secretary and Director. Mr. Wu has been a member of our Board of
Directors since July 8, 2004 and was appointed Secretary on October 3, 2004.
From May 2000 to Present, Mr. Wu has been a Director of Apollo Precise Parts,
Inc. From September 1996 to Present, Mr. Wu has been the President of Finest
Business Investment Development, Inc. From May 1992 to Present, Mr. Wu has been
the President of New Way Refrigeration & Air Conditioning, Ltd. From July 1987
to Present, Mr. Wu has been the President of Consumer Refrigeration & Appliance
Service, Ltd.

Scientific Advisory Board
The following comprises the Company's Scientific Advisory Board:

Professor Yu, Edward (X.F.): Chief TCM Advisor
Instrumental in the development of numerous natural products for China Health
Holding, Inc., Professor Yu was elected to the Board and appointed Vice
President in 2004. Past President and Director of Beijing's Taoist Tantric &
Toltec Research & Development Centre, he is currently a Research Scientific
Consultant at the city's Central TCM ( Traditional Chinese Medicine) Research &
Development Institute. Presently a professor in the Department of Philosophy,
Professor Yu teaches Taoism, Taoist Medicine and Indian classical philosophy and
religion at Beijing's University of CCCP.

Dr. Zhou, Joseph (J.R.) - Chief Medical Advisor
Dr. Zhou, Joseph (J.R.) is an Assistant Professor of Surgery at Harvard Medical
School and the Director of Nutrition/Metabolism Laboratory at Beth Israel
Deaconess Medical Center. Dr. Zhou received his Ph.D. in nutritional Sciences
from University of Illinois in 1994 and his postdoctoral training in
bio-nutrition and cancer prevention at Beth Israel deaconess Medical Center,
Harvard Medical School. Dr. Zhou is a national and international known expert in
nutrition and cancer prevention. Dr. Zhou also actively participates in several
review panels and study sections in National Institutes of Health and other
scientific foundations.

Dr. Ma, Yua-Chun : Chief Scientific Advisor
Dr. Ma, the President/CEO of Canadian Phytopharmceutical, specializes in
Research & development and manufacturing of botanical and natural pharmaceutical
products. He received an M.Sc. at HuBei University, PR China and Ph.D. in
Pharmaceutical Science at the University of Portsmouth, England. He served as
senior consultant for Health Canada and Agriculture Canada and also for the
National Research Council of Canada in R&D on standardization for Natural Health
Products in BC Canada.

                                       49
<PAGE>
Professor Fan, Zheng-lun : Chief Scientific Advisor
In 1982, Professor Zheng-Lun Fan acquired his MSC in Liao-Ning College of
Traditional Chinese Medicine. During the past five years, he has been a Research
Fellow at Cui Yue-li Research Center of Traditional Chinese Medicine. Professor
Fan also is a MSC, Professor, Chief Physician Research Fellow at Cui Yue-li
Research Center of Traditional Chinese Medicine, Beijing, P.R. China. Prof. Fan
is an expert of Chinese medicine at the national level in P. R. China and he has
practiced Chinese medicine for more than 40 years.

Audit Committee Financial Expert

We do not have an audit committee financial expert, as that term is defined in
Item 401 of Regulation S-B. We have not been able to identify a suitable nominee
to serve as an audit committee financial expert.

Code of Ethics

We have adopted our Code of Ethics and Business Conduct for 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 Health
Holding, Inc, either to (a) our business address at 101 Convention Center Drive,
Suite 700, Las Vegas, NV 89107, telephone (877) 883-0979 or (b) our mailing
address at Suite 600 - 666 Burrard St., Park Place, Vancouver, British Columbia,
Canada V6C 2X8, telephone (604) 608-6788. A copy of our Code of Ethics can also
be obtained from our website www.chinahealthholding.com.

Item 10. Executive Compensation.

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, 2005, 2004 and 2003.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
                                                                                                 Long-Term
                                                                                               Compensation
                                                                                ------------------------------ -------------
                                                  Annual Compensation                      Awards                Payouts
                                          ------------------------------------- ------------------------------ -------------
                                                                                                                              All
                                                                      Other                       Securities                 Other
                                                                     Annual     Restricted        Under-lying                Compen-
          Name and                         Salary ($)                Compen-    Stock Award(s)    Options/         LTIP      sation
     Principal Position          Year         (1)       Bonus ($)  sation ($)   ($)               SARs (#)(2)  Payouts ($)     ($)
------------------------------ ---------- ------------- ---------- ------------ ----------------- ------------ ------------- -------
<S>                             <C>       <C>          <C>            <C>             <C>            <C>           <C>         <C>
Julianna Lu, CEO,               2005      $192,000     $75,500        0               0              0             0           0
   principal financial
   officer                      2004       $84,000        0           0               0          3,300,000         0           0
   principal accounting
   officer,                     2003       $60,000        0           0               0                            0           0
   Treasurer and Chairman
   of the Board
</TABLE>


     (1)  Ms. Lu's salary for 2005, 2004 and 2003 has been accrued and is
          included in loans to our Company from Ms. Lu. Ms. Lu's loans are
          described more fully below under Item 12 Certain Relationship and
          Related Transactions. As of December 31, 2005, the Company owed an
          aggregate of $463,798. In addition, we have issued to Ms. Lu 500,000
          shares of common stock at a fair value of $0.15 per share as a bonus
          in December 2005.
     (2)  In 2004, Ms. Lu was granted the following (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; and (c) options
          to purchase 500,000 shares of common stock at $0.05 per share that
          expire on April 30, 2008..

                                       50
<PAGE>
Options/SARs Grants During Last Fiscal Year

The following table provides information related to options granted to our named
executive officers during the fiscal year ended December 31, 2005.



<TABLE>
<CAPTION>
                      Number of              % of Total
                      Securities             Options         Exercise
                      Underlying             Granted in      Price
       Name           Options Granted        Fiscal 2005     ($/Share)         Expiration Date
-----------------    ------------------    ----------------  ---------------   -----------------------
<S>         <C>         <C>                     <C>           <C>                     <C>
Julianna Lu (1)         1,000,000               21 %          $ 0.15             Dec. 23/08
Xiao Fei Yu               200,000                4 %          $ 0.15 to 0.80     Apr 30/06 to Dec 22/07
ZHeng-Lun Fan                 Nil                0 %          $ -                -
Dick Wu                   577,753               12 %          $ 0.30             Mar 30/06
</TABLE>

(1) On December 22, 2005, our board of directors approved the grant of 1,000,000
options to our President, Julianna Lu, to purchase shares of our preferred stock

Employment Agreements and Director Compensation

On June 1, 2004, we entered into an employment agreement with Julianna Lu,
pursuant to which Ms. Lu has agreed to be employed as our Chief Executive
Officer, Treasurer, Secretary, Director and Chairman of our Board of Directors.
The agreement commenced retroactively beginning May 1, 2004 and does not have an
expiration term. As compensation under the agreement, we agreed to pay Ms. Lu
$8,000 per month. Every six months, we will review Ms. Lu's management services
and her monthly compensation may increase 30% to 50% at the discretion of the
Board of Directors. In addition, we granted Ms. Lu options to purchase 2,500,000
shares of our common stock at a price of $0.10 per share. The options expire the
sooner of (a) June 1, 2009 or (b) thirty days after the termination of the
agreement. Ms. Lu will also be reimbursed for any actual out-of-pocket expenses
incurred while performing her duties under the agreement. Any individual expense
items, other than telephone invoices, in excess of $200 must first be approved
by us. Ms. Lu's employment agreement does not contain any termination
provisions.

On April 28, 2005, we entered into an agreement with Ms. Lu, updating the terms
of the June 1, 2004 employment agreement. The term of the updated agreement
commenced retroactively beginning May 1, 2004 and does not have an expiration
term. As compensation under the updated agreement, we agreed to increase Ms.
Lu's salary to $10,000 per month effective January 1, 2005. In addition, the
agreement requires us to pay Ms. Lu a 3% royalty of total gross sales of our
products effective January 1, 2005. All other terms of the June 1, 2004
employment agreement remain in effect.

On May 26, 2004, we entered into an agreement with Xiao Fei Yu, pursuant to
which Mr. Yu has agreed to act as a member of our Board of Directors. The
agreement commenced on May 26, 2004 and is for a term of two years. As
compensation, we granted Mr. Yu options to purchase 200,000 shares of our common
stock at a price of $0.10 per share. The options expire on sooner of (a) May 26,
2006 or (b) thirty days after the termination of the agreement. Mr. Yu will also
be reimbursed for any actual out-of-pocket expenses incurred while performing
her duties under the agreement. Any individual expense items, other than
telephone invoices, in excess of $200 must first be approved by China Health
Holding. Mr. Yu's employment agreement does not contain any termination
provisions.

On October 6, 2004, we amended the agreement with Mr. Yu and added to his
responsibilities the position of Vice President. Pursuant to the amendment, we
granted Mr. Yu an option to purchase 250,000 shares of our common stock at a
price of $0.20. The option expires the sooner of (a) July 9, 2007 or (b) thirty
days after termination of Mr. Yu's employment agreement, as amended.

                                       51
<PAGE>
On June 8, 2004, we entered into another agreement with Mr. Yu, pursuant to
which Mr. Yu is responsible for new products research and development,
manufacturing under GMP standards, the People's Republic of China market and
public relations. The agreement commenced on June 1, 2004 and is for a term of
two years. As compensation under this agreement, we agreed to pay Mr. Yu $1,000
per month. Mr. Yu's services will be reviewed every 6 months and may be
increased the discretion of our Board of Directors. In addition, we granted Mr.
Yu options to purchase 150,000 shares of our common stock at a price of $0.10
per share. The options expire the sooner of (a) June 1, 2006 or (b) thirty days
after the termination of the agreement. Mr. Yu will also be reimbursed for any
actual out-of-pocket expenses incurred while performing her duties under the
agreement. Any individual expense items, other than telephone invoices, in
excess of $200 must first be approved by China Health Holding.

On July 8, 2004, we entered into an agreement with Dick Wu, pursuant to which
Mr. Wu has agreed to act as a member of our Board of Directors. The agreement
commenced retroactively beginning July 6, 2004 and is for a term of one year.
Mr. Wu's services will be reviewed after a three month probationary period,
after which the agreement may be terminated by us for any reason. As
compensation, we granted Mr. Wu options to purchase 150,000 shares of our common
stock at a price of $0.10 per share. The options expire the sooner of (a) July
6, 2005 or (b) thirty days after the termination of the agreement.

On October 3, 2004, we amended the agreement with Mr. Wu and added to his
responsibilities the position of Secretary. Pursuant to the amendment, we
granted Mr. Wu an option to purchase 250,000 shares of our common stock at a
price of $0.20. The option expires the sooner of (a) July 7, 2007 or (b) thirty
days after the termination of Mr. Wu's employment agreement, as amended.

On November 8, 2004, we agreed to extend the term of Mr. Wu's employment
agreement for an additional year to expire on July 6, 2006. In connection with
the extension, we granted Mr. Wu an option to purchase 250,000 shares of our
common stock at a price of $0.20. The option expires the sooner of (a) November
7, 2006 or (b) thirty days after the termination of Mr. Wu's employment
agreement.

On May 1, 2005, we also entered into a consulting agreement with Dick Wu. Under
the consulting agreement, Dick Wu will provide corporate governance and other
management consulting services as our Vice President. The term of the consulting
agreement began May 1, 2005 and continues for two years terminating on April 30,
2007. After a three-month probationary period, the consulting agreement may be
terminated for any reason by either party. We agreed to grant Mr. Wu options to
purchase 150,000 shares of common stock at a price of $0.30 per share,
exercisable until April 30, 2006. We also agreed to grant Mr. Wu options to
purchase 150,000 shares of common stock at a price of $0.80 per share,
exercisable until the earlier of April 30, 2007 or 30 days after termination of
the consulting agreement.

Consulting Agreements

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

                                       52
<PAGE>

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.


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

The following table sets forth certain information, as of March 17, 2006 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.
<TABLE>
<CAPTION>
                                                       Common Stock          Preferred Stock         Percentage of
       Name and address of Beneficial Owner (1)   Beneficially Owned (2)    Beneficially owned     Common Stock (3)
       ----------------------------------------- ------------------------- --------------------- ----------------------
<S>                <C>                                  <C>                    <C>                       <C>
       Julianna Lu (4)                                  33,980,875             1,000,000                 56.43%

       Xiao Fei Yu (5)                                   4,727,000                                        7.85%

       Dick Wu (6)                                       1,625,463                                        2.70%

       Da Hong Li                                        1,375,000                                        2.28%

       Zhenge-Lun Fan                                      150,000                                            *

       James H. Simpson (7)                              4,948,738                                        8.22%
       ----------------------------------------- ------------------------- --------------------- ----------------------
       All  officers  and  directors as a group         41,858,338                                       69.26%
       (5 persons)
</TABLE>
* 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, telephone (877) 883-0979 or (b) our mailing address at Suite 600 - 666
Burrard St., Park Place, Vancouver, British Columbia, Canada V6C 2X8, telephone
(604) 608-6788.
(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 60,214,551 shares outstanding as of March 17, 2006.
(4) 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; and (c)
options to purchase 500,000 shares of common stock at $0.05 per share that
expire on April 30, 2008.
(5) Includes (a) options to purchase 150,000 shares of common stock at $0.10 per
share that expire on June 1, 2006; (b) options to purchase 200,000 shares of
common stock at $0.10 per share that expire on May 26, 2006; and (c) options to
purchase 250,000 shares of common stock at $0.20 per share that expire on July
9, 2007.
(6) Includes (a) options to purchase 250,000 shares of common stock at $0.20 per
share that expire on July 9, 2007; and (b) options to purchase 250,000 shares of
common stock at $0.20 per share that expire on November 7, 2006.
(7) Includes (a) options to purchase 300,000 shares of common stock at $.10 per
share that expire on June 16, 2009; and (b) options to purchase 600,000 shares
of common stock at $.30 per share that expire on December 31, 2008.

                                       53
<PAGE>
Item 12. Certain Relationships and Related Transactions.

     Pursuant to an agreement dated May 1, 2004 between A E&E Pharma Corporation
(n/k/a China Health Holding, Inc.), Julianna Lu, our founder and principal
executive officer, and Xiao Fei Yu. Ms. Lu and Mr. Yu sold to us all proprietary
rights and formulas to the "26 100% natural herbal medicinal products" (the
"Products") that comprise our King of Herbs and Taoist Medicine product lines.
On August 8, 2004, the parties signed an Amended and Restated Intellectual
Property Purchase Agreement, which clarifies the terms of the Purchase Agreement
for the Products. In consideration for the proprietary rights and formulas to
the Products, we agreed to: (a) issue to Ms. Lu 2,000,000 shares of common
stock; (b) pay to Ms. Lu $150,000 cash; (c) pay to Ms. Lu following the closing
date and until May 1, 2029, a cash amount equal to 4.8% of gross revenue from
sales of the Products; (d) issue to Mr. Yu 200,000 shares of common stock; (e)
pay to Mr. Yu $25,000 cash; and (f) pay to Mr. Yu following the closing date and
until May 1, 2029, a cash amount equal to 0.2% of gross revenue from sales of
the Products. None of the required cash payments have been made to date. The
outstanding cash payments under the Amended and Restated Intellectual Property
Agreement accrue interest at the rate of 10% per annum. Our management believes
the terms of the Amended and Restated Intellectual Property Agreement are on
terms at least as favorable as could have been obtained from unrelated third
parties.

     Since April 22, 2002, Julianna Lu has extended numerous loans to China
Health Holding. In addition, Ms. Lu's salary for 2005, 2004 and 2003 have
accrued and are carried as loans to the Company. The aggregate amount due to Ms.
Lu as of December 31, 2005 totaled $$463,798. These loans bear interest at the
rate of 10% per annum, are on an unsecured basis and do not have any terms for
repayment. These loans have not been documented by any written agreement. Our
management believes the terms of these loans are at least as favorable as could
have been obtained from unrelated third parties.

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

     As of December 31, 2005 China Health Holding owed an aggregate of $111,991
to Xiao Fei Yu from various loans and payments made by Mr. Yu on behalf of China
Health Holding. These loans bear interest at the rate of 10% per annum, are on
an unsecured basis and do not have any terms for repayment. These loans have not
been documented by any written agreement. Our management believes the terms of
these loans are at least as favorable as could have been obtained from unrelated
third parties.

     As of December 31, 2005 China Health Holding owed an aggregate of $1,679 to
James Simpson from various loans and payments. These loans bear interest at the
rate of 10% per annum, are on an unsecured basis and do not have any terms for
repayment. These loans have not been documented by any written agreement. Our
management believes the terms of these loans are at least as favorable as could
have been obtained from unrelated third parties.


                                       54
<PAGE>
Item 13. Exhibits.

Exhibit Number                  Description
------------------  ------------------------------------------------------------
3.01                Articles of Incorporation of the A E&E Pharma Corporation
                    (Incorporated by reference to the Company's registration
                    statement on Form SB-2 (File No. 333-119034), filed with the
                    Securities and Exchange Commission on September 16, 2004)

3.02                Certificate of Amendment to Articles of Incorporation,
                    changing name to China Health Holding, Inc. (Incorporated by
                    reference to the Company's registration statement on Form
                    SB-2 (File No. 333-119034), filed with the Securities and
                    Exchange Commission on September 16, 2004)

3.03                Certificate of Amendment to Articles of Incorporation
                    increasing the Company's authorized shares of common stock
                    (Incorporated by reference to the Company's 10-QSB filed
                    with the Securities and Exchange Commission on May 12, 2005)

3.04                Bylaws (Incorporated by reference to the Company's
                    registration statement on Form SB-2 (File No. 333-119034),
                    filed with the Securities and Exchange Commission on
                    September 16, 2004)

3.05                Certificate of Designation, Powers, Preferences and Rights
                    of Series A Preferred Stock, filed with the State of Nevada
                    on February 21, 2006. (Incorporated by reference to Form 8-K
                    filed with the Securities and Exchange Commission on March
                    28, 2006)

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)

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)

                                       55
<PAGE>
10.06               Manufacturing Agreement, dated December 18, 2005, between
                    Canadian Phytopharmaceuticals Corp. and China Health World
                    Trade Corporation (filed herewith)

10.07               Manufacturing Agreement, dated April 8, 2004, between A E&E
                    Pharma Corporation and GFR Pharma, Ltd. (Incorporated by
                    reference to the Company's registration statement on Form
                    SB-2 (File No. 333-119034), filed with the Securities and
                    Exchange Commission on September 16, 2004)

10.08               Lease Agreement, dated May 11, 2004, between A E&E Pharma
                    Corporation and Insignia Corporate Establishments (Eight)
                    Inc. (Incorporated by reference to the Company's
                    registration statement on Form SB-2 (File No. 333-119034),
                    filed with the Securities and Exchange Commission on
                    September 16, 2004)

10.9                Executive Management Services Agreement, dated June 1, 2004,
                    between China Health Holding, Inc. and Julianna Lu
                    (Incorporated by reference to the Company's registration
                    statement on Form SB-2 (File No. 333-119034), filed with the
                    Securities and Exchange Commission on September 16, 2004)

10.10               Director Services Agreement, dated May 26, 2004, between
                    China Health Holding, Inc. and Xiao Fei Yu (Incorporated by
                    reference to the Company's registration statement on Form
                    SB-2 (File No. 333-119034), filed with the Securities and
                    Exchange Commission on September 16, 2004)

10.11               Consulting Services Agreement, dated June 8, 2004, between
                    China Health Holding, Inc. and Xiao Fei Yu (Incorporated by
                    reference to the Company's registration statement on Form
                    SB-2 (File No. 333-119034), filed with the Securities and
                    Exchange Commission on September 16, 2004)

10.12               Director Consulting Services Agreement, dated July 8, 2004,
                    between China Health Holding, Inc. and Dick Wu (Incorporated
                    by reference to the Company's registration statement on Form
                    SB-2 (File No. 333-119034), filed with the Securities and
                    Exchange Commission on September 16, 2004)

10.13               Management Services Agreement, dated July 9, 2004, between
                    China Health Holding, Inc. and Kenneth Douglas (Incorporated
                    by reference to the Company's registration statement on Form
                    SB-2 (File No. 333-119034), filed with the Securities and
                    Exchange Commission on September 16, 2004)

10.14               Consulting Agreement, dated August 8, 2004, between China
                    Health Holding, Inc. and National Media Associates
                    (Incorporated by reference to the Company's registration
                    statement on Form SB-2 (File No. 333-119034), filed with the
                    Securities and Exchange Commission on September 16, 2004)

10.15               Amendment No. 1 to Consulting Agreement, dated September 6,
                    2004, between China Health Holding, Inc. and National Media
                    Associates (Incorporated by reference to the Company's
                    registration statement on Form SB-2 (File No. 333-119034),
                    filed with the Securities and Exchange Commission on
                    September 16, 2004)

10.16               Letter Agreement, dated November 2, 2004, amending the
                    Exclusive Licensing Agreement for 19 Cordyceps Products and
                    the Exclusive Licensing Agreement for De-Daibe and Depressor
                    Herbs between Hotway Nutraceutical Canada Co., Ltd. and A
                    E&E Pharma Corporation (Incorporated by reference to the
                    Company's registration statement on Form SB-2 (File No.
                    333-119034), filed with the Securities and Exchange
                    Commission on November 22, 2004)

                                       56
<PAGE>
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)

                                       57
<PAGE>
10.26               Consulting Agreement dated June 9, 2005 with CEOcast, Inc.
                    (Incorporated by reference to the Company's current report
                    on Form 8-K filed with the Securities and Exchange
                    Commission on June 15, 2005)

10.27               The China Health Holding, Inc. Incentive Stock Plan
                    effective June 21, 2005. (Incorporated by reference to the
                    Company's Registration Station on Form S-8 filed with the
                    Securities and Exchange Commission on June 24, 2005)

10.28               Letter of Intent entered into as of January 16, 2006 by and
                    between China Health Holding, Inc. and with WangJing
                    Hospital and WangJing Hospital of China Academy of Chinese
                    Medical Sciences. (Incorporated by reference to the
                    Company's current report on Form 8-K filed with the
                    Securities and Exchange Commission on February 2, 2006)

10.29               Letter of Intent effective as of February 28, 2006 by and
                    between China Health Holding, Inc. and Shaanxi WanAn
                    Pharmaceutical Co. Ltd. (Incorporated by reference to the
                    Company's current report on Form 8-K filed with the
                    Securities and Exchange Commission on February 28, 2006)

14.1                Code of Ethics

31.1                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 2002

32.1                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 2002



Item 14. Principal Accountant Fees and Services.

Audit Fees

The aggregate fees billed for professional services rendered by our principal
accountants for the audit of our financial statements, for the reviews of the
financial statements included in our annual report on Form 10-KSB, and for other
services normally provided in connection with statutory filings were $22,000 and
$10,000 for the years ended December 31, 2005 and December 31, 2004,
respectively.

Audit Related Fees

We incurred fees of $12,500and $6,365 for the years ended December 31, 2005 and
December 31, 2004, 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, 2005 and December 31,
2004.

Audit Committee Pre-Approval Policies and Procedures

Not applicable.


                                       58
<PAGE>

                                   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 HEALTH HOLDING, INC.


     Dated:   March 31, 2006    By: /s/ Julianna Lu
                                ----------------
                                Julianna Lu
                                Chief 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    March 31, 2006
         ---------------
         Julianna Lu


         /s/ Xiao Fei Yu    Director/Vice President               March 31, 2006
         ---------------
         Xiao Fei Yu


         /s/ Dick Wu        Director                              March 31, 2006
         -----------
         Dick Wu




                                       59
<PAGE>

                            CHINA HEALTH HOLDING INC.

                          (a development stage company)

                        CONSOLIDATED FINANCIAL STATEMENTS


                                DECEMBER 31, 2005





    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.............F-2

    CONSOLIDATED BALANCE SHEETS.........................................F-3

    CONSOLIDATED STATEMENTS OF OPERATIONS...............................F-4

    CONSOLDIATED STATEMENT OF STOCKHOLDERS' DEFICIT.....................F-5-F-6

    CONSOLIDATED STATEMENTS OF CASH FLOWS...............................F-7

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..........................F-8-F-24


                                      F-1
<PAGE>
      DALE MATHESON
CARR-HILTON LABONTE
CHARTERED ACCOUNTANTS
--------------------------------------------------------------------------------



            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors of China Health Holding, Inc.:

We have audited the accompanying consolidated balance sheets of China Health
Holding, Inc. (a development stage company) as of December 31, 2005 and 2004,
and the consolidated statements of operations, stockholders' deficit and cash
flows for the years ended December 31, 2005 and December 31, 2004 and for the
period from April 3, 2002 (inception) to December 31, 2005. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly in all
material respects, the financial position of the Company as at December 31, 2005
and 2004 and the results of operations and its cash flows and the changes in
stockholders' deficit for the years ended December 31, 2005 and December 31,
2004 and for the period from April 3, 2002 (inception) to December 31, 2005 in
accordance with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2(a) to the
financial statements, the Company has a working capital deficiency, a capital
deficiency, has incurred significant losses since inception and further losses
are anticipated in the development of its products raising substantial doubt as
to the Company's ability to continue as a going concern. Management's plans in
regard to these matters are described in Note 2(a). The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.




                                    SIGNED:  "DALE MATHESON CARR-HILTON LABONTE"
                                                        CHARTERED ACCOUNTANTS
Vancouver, Canada.
March 15, 2006


                                      F-2
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                              December 31,      December 31,
                                                                                                2005               2004
                                                                                                  $                 $
                                                                                                                (Restated)
                                                                                                                 (Note 2m)


                                     ASSETS

<S>                                                                                              <C>                   <C>
CURRENT ASSETS
    Cash                                                                                         14,887                3,511
    Prepaid expenses                                                                              5,126                6,000
                                                                                            -----------          -----------
                                                                                                 20,013                9,511

PROPERTY AND EQUIPMENT, net (Note 4)                                                             14,631                5,132

INTANGIBLE ASSETS (Note 3)                                                                            3                    2

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 34,647               14,645

====================================================================================================================================
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
    Accounts payable and accrued liabilities                                                     33,785               24,172
     Due to shareholders (Note 5)                                                               584,639              335,014
                                                                                            -----------          -----------
                                                                                                618,424              359,186
                                                                                            -----------          -----------
COMMITMENTS (Notes 3 and 9)

STOCKHOLDERS' DEFICIT
       Preferred stock, $0.001 par value, 20,000,000 shares authorized,
          1,000,000  (2004 - nil) shares issued and outstanding                                   1,000                    -
       Common stock, $0.001 par value, 300,000,000 shares authorized
          46,596,931 (2004 - 36,522,700) shares issued and outstanding                           46,597               36,523
       Additional paid-in capital                                                             5,676,104            2,293,570
       Deferred compensation (Note 7)                                                          (257,514)            (343,750)
       Deficit accumulated during the development stage                                      (5,996,301)          (2,319,622)
       Accumulated other comprehensive loss                                                     (53,663)             (11,262)
                                                                                            -----------          -----------
                                                                                               (583,777)            (344,541)

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 34,647               14,645

 The accompanying notes are an integral part of these consolidated financial statements
</TABLE>

                                      F-3
<PAGE>

                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
                                                                                                   Cumulative results
                                                                                                   of operations from
                                                                                                      April 3, 2002
                                                               Year ended         Year ended         (inception) to
                                                            December 31, 2005  December 31, 2004    December 31, 2005
                                                                    $                  $                    $

<S>                                                                    <C>                <C>                 <C>
SALES                                                                  1,671              7,305               8,976
Cost of goods sold                                                      (245)                 -                (245)
                                                                  ----------         ----------          ----------
                                                                       1,426              7,305               8,731
                                                                  ----------         ----------          ----------

EXPENSES
       Advertising and promotion                                      68,837             17,968             115,847
       Amortization of intangible assets                                   -              7,125               7,125
       Consulting fees (Notes 6 and 7)                             1,491,753            424,300           1,922,889
       Depreciation                                                    3,894                883               4,906
       Interest and bank charges (Note 8)                             47,344             19,973              73,460
       Investor relations                                             34,623                  -              34,623
       Management fees (Note 7)                                      391,396            704,000           1,200,396
       Office                                                         12,913              8,609              26,495
       Professional fees (Note 7)                                    216,061            319,206             542,105
       Rent                                                           20,888             15,595              53,569
       Research and development (Note 3)                           1,377,287            366,306           1,743,593
       Travel                                                         17,749              8,060              26,170
       Vehicle                                                         2,477              1,385               7,692
                                                                  ----------         ----------          ----------
                                                                   3,685,222          1,893,410           5,758,870
                                                                  ----------         ----------          ----------

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

LOSS FROM OPERATIONS                                              (3,683,796)        (1,886,105)         (5,750,139)

OTHER INCOME (EXPENSES)
       Foreign exchange                                               21,845                  -              21,845
       Impairment of licensing rights (Note 3)                             -           (182,874)           (182,874)
       Loss on settlement of debts and issuance of
       shares (Notes 7 and 11)                                       (14,728)           (29,297)            (85,133)
                                                                  ----------         ----------          ----------
                                                                       7,117           (212,171)           (246,162)
                                                                  ----------         ----------          ----------


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

NET LOSS                                                          (3,676,679)        (2,098,276)         (5,996,301)

===================================================================================================================
BASIC NET LOSS PER SHARE (Note 2 f)                                   ($0.07)            ($0.05)

===================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (Note 2 f)                                            52,596,919         43,575,183

===================================================================================================================

 The accompanying notes are an integral part of these consolidated financial statements
</TABLE>

                                      F-4
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
       FOR THE PERIOD FROM APRIL 3, 2002 (INCEPTION) TO DECEMBER 31, 2005
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Deficit
                                                                                Deferred      Accumulated  Accumulated
                                                                    Additional Compensation   During the       Other
                                 Common Stock     Preferred Stock   Paid-in    (Restated)    Development    Comprehensive
                              Number      Amount  Number of  Amount Capital    (Note 2m)        Stage       Income (Loss)    Total
                             of Shares       $     Shares       $      $            $              $                $          $

------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>        <C>        <C>      <C>       <C>       <C>        <C>        <C>      <C>       <C>
Issued for cash at average
  of $0.0026 per share       22,895,000  22,895        -      -      35,805           -             -              -         58,700
Net loss for the period               -       -        -      -           -           -       (71,673)             -        (71,673)
Currency translation
  adjustment                          -       -        -      -           -           -             -            532            532

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

Balance, 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                      2,530,000   2,530        -      -      29,770           -             -              -         32,300
Issued for debt at an
   average of $0.01 per
   share                      3,650,000   3,650        -      -      32,850           -             -              -         36,500
Issued for consulting
    services at an
    average of $0.076
    per share                    90,000      90        -      -       6,760           -             -              -          6,850
Net 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           -             -              -        130,821
Issued for debt at $0.06
    per share                   310,000     310        -      -      18,490           -             -              -         18,800
Issued for consulting,
    professional and other
    services at an average
    of $0.25 per share        2,231,000   2,231        -      -     547,584    (203,125)            -              -        346,690
Issued for intellectual
    property (Note 3)         2,200,000   2,200        -      -     189,107           -             -              -        191,307
Issued for licensing rights
    (Note 3)                    760,000     760        -      -     189,240           -             -              -        190,000
Exercise of options an
    average of  $0.13
    per share                   500,000     500        -      -      64,500           -             -              -         65,000
Stock-based compensation              -       -        -      -   1,050,000    (140,625)            -              -        909,375
Net 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)


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


                                      F-5
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
       FOR THE PERIOD FROM APRIL 3, 2002 (INCEPTION) TO DECEMBER 31, 2005

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Deficit
                                                                                 Deferred      Accumulated   Accumulated
                                                                     Additional Compensation   During the      Other
                                 Common Stock       Preferred Stock    Paid-in    (Restated)    Development  Comprehensive
                                Number    Amount    Number of   Amount Capital    (Note 2m)        Stage     Income (Loss)    Total
                               of Shares     $       Shares       $      $            $              $             $          $
------------------------------------------------------------------------------------------------------------------------------------
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                       1,080,000      1,080          -      -     268,920         -               -           -     270,000
Issued for intellectual
   rights at $0.30 per
   share                       4,500,000      4,500          -      -   1,345,500         -               -           -   1,350,000
Issued for consulting
   at an average of
   $0.31 per share             4,567,900      4,568          -      -   1,392,297  (257,514)              -           -   1,139,351
Issued to settle debt at
   $0.15 per share                     -          -  1,000,000  1,000     149,000         -               -           -     150,000
Issued to settle debt at
   $0.17 per share               277,753        278          -      -      46,940         -               -           -      47,218
Exercise of options at
   $0.10 per share               348,578        348          -      -      34,510         -               -           -      34,858
Stock-based compensation               -          -          -      -     344,667         -               -           -     344,667
Finder's fee paid                      -          -          -      -     (25,000)        -               -           -     (25,000)
Shares cancelled at $0.25
   per share                    (700,000)      (700)         -      -    (174,300)  175,000               -           -           -
Amortize deferred
   compensation                        -          -          -      -           -   168,750               -           -     168,750
Net loss                               -          -          -      -           -         -      (3,676,679)          -  (3,676,679)
Currency translation
   adjustment                          -          -          -      -           -         -               -     (42,401)    (42,401)

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

Balance, December 31, 2005    46,596,931     46,597   1,000,000 1,000   5,676,104  (257,514)     (5,996,301)    (53,663)   (583,777)

 The accompanying notes are an integral part of these consolidated financial statements
</TABLE>

                                      F-6
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                                       Cumulative results
                                                                                                       of operations from
                                                                                                          April 3, 2002
                                                                   Year ended         Year ended         (inception) to
                                                                December 31, 2005  December 31, 2004    December 31, 2005
                                                                        $                  $                    $


<S>                                                                   <C>                  <C>                 <C>
OPERATING ACTIVITIES
       Net loss                                                       (3,676,679)          (2,098,276)         (5,996,301)
       Adjustments to reconcile net loss to cash used in
       operating activities:
          Accrued interest on shareholder loans                           45,307               19,734              70,160
          Amortization of intangible assets                                    -                7,125               7,125
          Depreciation                                                     3,894                  883               4,906
          Impairment of licensing rights                                       -              182,874             182,874
          Research and development costs paid with shares              1,359,999                    -           1,359,999
          Loss on settlement of debts and issuance of shares              14,071               29,297              84,476
          Non cash expenses paid with shares                           1,467,121              795,544           2,329,515
          Stock-based compensation                                       344,667              909,375           1,254,042

       Changes in operating assets and liabilities
          Prepaid expenses                                                23,841                 (60)              23,009
          Accounts payable and accrued liabilities                         9,612               17,876              42,165
                                                                       ---------            ---------           ---------
Net cash used in operating activities                                   (408,167)            (135,628)           (638,030)
                                                                       ---------            ---------           ---------

INVESTING ACTIVITIES
       Purchase of property and equipment                                (13,392)              (3,721)            (19,536)
                                                                       ---------            ---------           ---------
Net cash used in investing activities                                    (13,392)              (3,721)            (19,536)
                                                                       ---------            ---------           ---------

FINANCING ACTIVITIES
       Proceeds from issuance of common stock                            245,000              178,305             513,697
       Net  advances (repayment) from shareholders                       230,336              (34,523)            212,419
                                                                       ---------            ---------           ---------
Net cash provided by financing activities                                475,336              143,782             726,116
                                                                       ---------            ---------           ---------

EFFECT OF EXCHANGE RATE CHANGES                                          (42,401)              (1,204)            (53,663)
                                                                       ---------            ---------           ---------

NET INCREASE IN CASH                                                      11,376                3,229              14,887

CASH, BEGINNING OF YEAR                                                    3,511                  282                   -
------------------------------------------------------------------------------------------------------------------------------------
CASH, END OF YEAR                                                         14,887                3,511              14,887
====================================================================================================================================
SUPPLEMENTARY DISCLOSURES:
    Interest paid                                                              -                    -                   -
    Income taxes paid                                                          -                    -                   -
====================================================================================================================================

SUPPLEMENTARY NON-CASH INFORMATION (Note 7)

 The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
                                      F-7
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

1.   NATURE OF OPERATIONS AND BASIS OF PRESENTATION

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

     China Health Holding Inc. (the "Company") is a Nevada company incorporated
     on April 3, 2002 as A E&E Pharma Corporation. The Company changed its name
     to China Health Holding Inc. on May 25, 2004. The Company is a development
     stage company that is engaged in the acquisition, development, marketing
     and manufacturing of innovative enhanced traditional Chinese medicinal
     herbal supplement product lines. The Company's product lines include
     dietary food supplements that are helpful in strengthening the immune
     system and cardio-cerebral vascular function as well as promoting overall
     physical and mental health. The Company's three primary product lines
     include the King of Herbs-based products, the Taoist herbal medicinal
     products and a line of natural multi-vitamins and supplements. All of the
     Company's products are based on traditional Chinese medicine and the
     principals of Taoism (see Note 3).

     The Company plans to introduce a line of natural skin care and cosmetic
     products as well as to develop new products based on its knowledge of
     traditional Chinese medical practice.

     The Company completed a Form SB-2 registration statement with the United
     States Securities and Exchange Commission on February 11, 2005 and received
     approval from the NASD for the listing of the Company's shares for trading
     on the Over the Counter Bulletin Board ("OTCBB') on April 18, 2005.

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

2.    SIGNIFICANT ACCOUNTING POLICIES

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

       a) Basis of presentation

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

         The financial statements have been prepared on the basis of a going
         concern which contemplates the realization of assets and the
         satisfaction of liabilities in the normal course of business. The
         Company has a working capital deficiency of $598,411 and a
         stockholders' deficit of $583,777 at year end and has incurred
         significant losses since inception and further losses are anticipated
         in the development of its products raising substantial doubt as to the
         Company's ability to continue as a going concern.

         The Company will depend almost exclusively on outside capital to
         complete the development of its intellectual property and marketing of
         its products. Such outside capital will include proceeds from the
         issuance of equity securities and may include commercial borrowing.
         There can be no assurance that capital will be available as necessary
         to meet these development costs or, if the capital is available, that
         it will be on terms acceptable to the Company. The issuances of
         additional equity securities by the Company may result in a significant
         dilution in the equity interests of its current stockholders. Obtaining
         commercial loans, assuming those loans would be available, will
         increase the Company's liabilities and future cash commitments. 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.

                                      F-8
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005


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

2.    SIGNIFICANT ACCOUNTING POLICIES - CONT'D

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

       a) Basis of presentation (continued)

         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.

       b) Consolidation

         The consolidated financial statements include the accounts of the
         Company and its wholly-owned subsidiaries, China Health Pharmaceutical
         Corporation and China Health World Trade Corporation. Those
         subsidiaries have not yet commenced operations and have no significant
         assets, liabilities, revenues or expenses.

       c) Use of estimates and assumptions

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

       d) Property and equipment

         Property and equipment is stated at cost. Depreciation is computed at
         the following rates over the estimated useful lives of the assets:

                        Computer - 30% declining balance
                        Furniture and fixtures - 20% declining balance

       e) Revenue recognition

         The Company's revenue is primarily derived from the sale of herbal
         medicinal products and natural food supplements. The Company records
         revenue when the amount is fixed or determinable, delivery has occurred
         or services have been performed and both title and risk of loss have
         transferred to the customer, and collection is reasonably assured.

       f) 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.

         On February 16, 2006, the Company declared a stock dividend on the
         basis of one new common share for every four shares outstanding. Unless
         otherwise noted, all references to average numbers of common shares
         outstanding and related per share amounts in these Financial Statements
         and Notes to Financial Statements prior to the effective dates of the
         stock dividend have been restated to reflect the one-for-four stock
         dividend on a retroactive basis.


                                      F-9
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

2.    SIGNIFICANT ACCOUNTING POLICIES - CONT'D

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

       g) 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.

       h) 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. Management has determined that the Company's
         proprietary rights and formulas described in Note 3 a), which are
         carried at a nominal value, have indefinite lives and as such are not
         subject to amortization.

         Costs incurred in connection with the licence agreements entered into
         as described in Note 3 b) would normally be amortized on a
         straight-line basis over the term of the underlying licence agreements
         and then tested for impairment annually in accordance with SFAS No.
         144, "Accounting for the Impairment on Disposal of Long-Lived Assets".
         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. Management has
         determined that it is not possible at this time to estimate future cash
         flows from these assets and has recorded an impairment charge of
         $182,874 in 2004 to reduce the carrying value of these intangible
         assets to $1.

         Management has determined that the Company's proprietary rights and
         formulas described in Note 3 c) have indefinite lives and as such are
         not subject to amortization. Management has, however, determined that
         it is not possible at this time to estimate future cash flows from
         these assets and has recorded as research and development expense of
         $1,359,999 in 2005 to reduce the carrying value to $1.

       i) Foreign currency translation

         The Company's functional currency is the Canadian dollar. 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.


                                      F-10
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

2.    SIGNIFICANT ACCOUNTING POLICIES - CONT'D

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

       j) 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, 2005, full
         deferred tax asset valuation allowance has been provided and no
         deferred tax asset benefit has been recorded.

       k) Stock-based compensation

         The Company has elected to continue to account for stock-based employee
         compensation arrangements in accordance with the provisions of
         Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
         Stock Issued to Employees", and comply with the disclosure provisions
         of SFAS No. 123 as amended by SFAS No. 148, "Accounting for Stock-Based
         Compensation--Transition and Disclosure, an amendment of FASB Statement
         No. 123". In addition, in accordance with SFAS No. 123 the Company
         applies the fair value method using the Black-Scholes option pricing
         model in accounting for options granted to consultants. Under APB No.
         25, compensation expense is recognized based on the difference, if any,
         on the date of grant between the estimated fair value of the Company's
         stock and the amount an employee must pay to acquire the stock.
         Compensation expense is recognized immediately for past service and
         pro-rata for future service over the option-vesting period.

         The following table illustrates the pro forma effect on net income and
         earnings per share as if the Company had accounted for its stock-based
         employee compensation using the fair value provisions of SFAS No. 123
         using the assumptions as described in Note 6:
<TABLE>
<CAPTION>


                                                                                  Years Ended
                                                                                  December 31,
                                                                           2005                 2004
                                                                             $                    $


<S>                                                                       <C>                  <C>
         Net loss - as reported                                           (3,676,679)          (2,098,276)
         Add: Stock-based compensation expense included in net
           loss - as reported                                                344,667              909,375
         Deduct: Stock-based compensation expense determined under
           fair value method                                                (581,264)            (909,375)
                                                                   -------------------------------------------

         Net loss - pro forma                                             (3,913,276)          (2,098,276)
                                                                   -------------------------------------------

         Net loss per share - basic and diluted - as reported                  (0.07)               (0.05)
         Net loss per share - basic and diluted - pro forma                    (0.07)               (0.05)
</TABLE>
         The Company accounts for equity instruments in exchange for the receipt
         of goods or services from other than employees in accordance with SFAS
         No. 123 and the conclusions reached by the Emerging Issues Task Force
         ("EITF") in Issue No. 96-18, "Accounting for Equity Instruments That
         Are Issued to Other than Employees for Acquiring or in Conjunction with
         Selling Goods or Services". Costs are measured at the estimated fair
         market value of the consideration received or the estimated fair value
         of the equity instruments issued, whichever is more reliably
         measurable. The value of equity instruments issued for consideration
         other than employee services is determined on the earlier of a
         performance commitment or completion of performance by the provider of
         goods or services as defined by EITF No. 96-18.


                                      F-11
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

2.    SIGNIFICANT ACCOUNTING POLICIES - CONT'D

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

       l) Recent accounting pronouncements

         In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment",
         which establishes standards for the accounting for transactions in
         which an entity exchanges its equity instruments for goods or services.
         A key provision of this statement is the requirement of a public entity
         to measure the cost of employee services received in exchange for an
         award of equity instruments (including stock options) based on the
         grant date fair value of the award. That cost will be recognized over
         the period during which an employee is required to provide service in
         exchange for the award (i.e., the requisite service period or vesting
         period). This standard becomes effective for the Company for the
         interim period beginning after December 15, 2005. Management is
         currently evaluating the impact of this standard on the Company's
         financial condition and results of operations.

         In March 2005, the SEC staff issued Staff Accounting Bulletin ("SAB")
         No. 107, "Share based payment", to give guidance on the implementation
         of SFAS 123R. The Company will consider SAB No. 107 during
         implementation of SFAS No. 123R.

         In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47,
         "Accounting for Conditional Asset Retirement Obligations". Under the
         provisions of FIN No. 47, the term conditional asset retirement
         obligation as used in SFAS No. 143, "Accounting for Asset Retirement
         Obligations", refers to a legal obligation to perform an asset
         retirement activity in which the timing and/or method of settlement are
         conditional on a future event that may or may not be within the control
         of the entity while the obligation to perform the asset retirement
         activity is unconditional. Accordingly, an entity is required to
         recognize a liability for the fair value of a conditional asset
         retirement obligation if the fair value of the liability can be
         reasonably estimated. The fair value of a liability for the conditional
         asset retirement obligation is required to be recognized when
         incurred--generally upon acquisition, construction, or development
         and/or through the normal operation of the asset. The Company has
         adopted FIN No. 47 as of December 31, 2005. Adoption of this
         pronouncement did not have a significant effect on the 2005 financial
         statements, and management does not expect this pronouncement to have a
         significant effect on our future reported financial position or
         earnings.

         In May 2005, the Financial Accounting Standards Board ("FASB") issued
         SFAS No. 154, "Accounting Changes and Error Corrections - A Replacement
         of APB Opinion No. 20 and SFAS No. 3". SFAS No. 154 changes the
         requirements for the accounting for and reporting of a change in
         accounting principle and applies to all voluntary changes in accounting
         principle. It also applies to changes required by an accounting
         pronouncement in the unusual instance that the pronouncement does not
         include specific transition provisions. SFAS No. 154 requires
         retrospective application to prior periods' financial statements of
         changes in accounting principle, unless it is impracticable to
         determine either the period-specific effects or the cumulative effect
         of the change. The provisions of SFAS No. 154 are effective for
         accounting changes and correction of errors made in fiscal years
         beginning after December 15, 2005. The adoption of this standard is not
         expected to have a material effect on the Company's results of
         operations or financial position.


         In July 2005, the FASB issued SFAS No. 154, "Accounting for Changes and
         Error Corrections - A Replacement of APB Opinion No. 20 and FASB
         Statement No. 3". Under the provisions of SFAS No. 154, a voluntary
         change in accounting principle requires retrospective application to
         prior period financial statements, unless it is impracticable to
         determine either the period-specific effects or the cumulative effect
         of the change. A change in depreciation, amortization, or depletion
         method for long-lived, nonfinancial assets must be accounted for as a
         change in accounting estimate effected by a change in accounting
         principle. The guidance contained in APB No. 20 for reporting the
         correction of an error in previously issued financial statements and a
         change in accounting estimate was not changed. The Company will
         implement this new standard beginning January 1, 2006. This standard is
         not expected to have a significant effect on our future reported
         financial position or results of operations.

                                      F-12
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

2.    SIGNIFICANT ACCOUNTING POLICIES - CONT'D

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

         In November 2005, the FASB issued Staff Position ("FSP")
         FAS115-1/124-1, "The Meaning of Other-Than-Temporary Impairment and Its
         Application to Certain Investments", which addresses the determination
         as to when an investment is considered impaired, whether that
         impairment is other than temporary, and the measurement of an
         impairment loss. This FSP also includes accounting considerations
         subsequent to the recognition of an other-than-temporary impairment and
         requires certain disclosures about unrealized losses that have not been
         recognized as other-than-temporary impairments. The guidance in this
         FSP amends FASB Statements No. 115, Accounting for Certain Investments
         in Debt and Equity Securities, and No. 124, Accounting for Certain
         Investments Held by Not-for-Profit Organizations, and APB Opinion No.
         18, The Equity Method of Accounting for Investments in Common Stock.
         This FSP is effective for reporting periods beginning after December
         15, 2005. Management does not believe the adoption of this FSP will
         have a material impact on our future reported financial position or
         results of operations.


       m) Restatement and reclassifications

         Certain comparative figures have been reclassified to conform to the
         current year's method of presentation. Also effective December 31,
         2005, the Company revised its accounting for share issued for deferred
         compensation to include these costs in stockholders' deficit and not in
         prepaid expenses. Accordingly, the comparative financial statements
         have been restated to conform with this accounting treatment. This
         change in accounting had no effect on the reported results of
         operations or cash flows for 2004; however, reported total assets and
         stockholders' equity were reduced by $343,750.


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

3.    INTANGIBLE ASSETS

--------------------------------------------------------------------------------
       a) Asset purchase agreement

         Pursuant to an asset purchase agreement dated May 1, 2004, the Company
         acquired from the Company's President and a significant shareholder
         proprietary rights and formulas to the 26 natural herbal medicinal
         products that comprise the King of Herbs and Taoist Medicine product
         lines. In exchange for the proprietary rights and formulas to these
         products, the Company agreed to pay total consideration as follows:
<TABLE>
<CAPTION>
<S>        <C>                                                                 <C>
         - 2,200,000 common shares with a fair value of $0.87 per share        $191,307
         - Assumption of debt owing to shareholders                             175,000
                                                                                -------
                                                                               $366,307
                                                                               ========
</TABLE>
         The amount due to shareholders bears interest at 10% per annum, is
         unsecured and has no specific terms of repayment. In addition, the
         Company agreed to pay the vendors a combined total royalty equal to 5%
         of annual gross sales of the products until May 1, 2009.

         For accounting purposes, the Company has recorded the cost of acquiring
         the proprietary rights and formulas as intangible assets at the related
         party vendor's carrying value of $1. The excess of the purchase price
         over the carrying value of the intangible assets totalling $366,306 has
         been expensed as research and development costs during the year ended
         December 31, 2004.

                                      F-13
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

3.    INTANGIBLE ASSETS

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

       b) Licensing rights agreement

         On March 9, 2004, the Company entered into an initial licensing
         agreement (the "Cordyceps Agreement") with Hotway Nutraceuticals Canada
         Co., Ltd. ("Hotway"), a British Columbia company. Under this agreement,
         Hotway has granted the Company exclusive licenses to 19 cordyceps
         products for a term of twenty years in the following countries: United
         States, Canada, Argentina, Brazil, Columbia, Chile, Uruguay, Paraguay,
         England, France, Germany, Italy, Spain, Holland, Poland, Switzerland,
         Sweden, Australia, Monaco, Norway, Denmark, Austria, Ireland, Israel,
         Kuwait, Iran, Hong Kong, Japan, Malaise, Singapore, India, Indonesia
         and the People's Republic of China. The Cordyceps Agreement grants the
         Company (a) the exclusive license to utilize 19 neutraceutical products
         and their raw materials in the above-listed territories; (b) the
         exclusive rights to register the Trademarks/Trade Names of the products
         under the Company's name in each of the above-listed territories; (c)
         the exclusive license to use, replicate, copy, modify, adopt and
         manufacture the products for the purpose of developing derivative
         products by modifying, refining, upgrading, or improving the licensed
         property; and (d) the exclusive rights to the licensed products'
         ingredients. In addition, Hotway granted the Company a right of first
         refusal to acquire any new products developed by Hotway after January
         9, 2004. In consideration for rights granted under the Cordyceps
         Agreement, the Company agreed to pay Hotway $10,000 for each country
         listed above, for a total of $330,000, originally due to Hotway by
         March 9, 2005. The Company also agreed to: (a) sell a minimum of 2,000
         bottles/60 capsules of the licensed products within 6-12 months after
         March 9, 2004; (b) manage marketing programs for the licensed products
         within 3-6 months after March 9, 2004; (c) maintain sales of a minimum
         of 6,000 bottles/60 capsules annually for each above-listed country
         within 6-12 months after March 9, 2004; and (d) sell a minimum of
         200kg/month of raw materials in Canada within 6-12 months after March
         9, 2004.

         On March 9, 2004, the Company entered into another licensing agreement
         (the "De-Daibe Agreement"), which grants the Company exclusive licenses
         to De-Daibe and Depressor Herbs neutraceutical products for a term of
         twenty years in the following countries: United States, Canada,
         Argentina, Brazil, Columbia, Chile, Uruguay, Paraguay, England, France,
         Germany, Italy, Spain, Holland, Poland, Switzerland, Sweden, Australia,
         Monaco, Norway, Denmark, Austria, Ireland, Israel, Kuwait, Iran, Hong
         Kong, Japan, Malaise, Singapore, India, Indonesia and the People's
         Republic of China. This licensing agreement grants the Company (a) the
         exclusive license to utilize the De-Daibe and Depressor Herbs
         neutraceutical products and their raw materials in the above-listed
         territories; (b) the exclusive rights to register the Trademarks/Trade
         Names of the products under the Company's name in each of the
         above-listed territories; (c) the exclusive license to use, replicate,
         copy, modify, adopt and manufacture the products for the purpose of
         developing derivative products by modifying, refining, upgrading, or
         improving the licensed property; and (d) the exclusive rights to the
         licensed products' ingredients. In addition, Hotway granted the Company
         a right of first refusal to acquire any new products developed by
         Hotway after March 9, 2004. In consideration for rights granted under
         the De-Daibe Agreement, the Company agreed to pay Hotway $10,000 for
         each country listed above, for a total of $330,000 originally due to
         Hotway by March 9, 2005. The Company also agreed to: (a) sell a minimum
         of 2,000 bottles/60 capsules of the licensed products within 6-12
         months after March 9, 2004; (b) manage marketing programs for the
         licensed products within 3-6 months after March 9, 2004; (c) maintain
         sales of a minimum of 6,000 bottles/60 capsules annually for each
         above-listed country within 6-12 months after March 9, 2004; and (d)
         sell a minimum of 200kg/month of raw materials in Canada within 6-12
         months after March 9, 2004.

                                      F-14
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005


3.    INTANGIBLE ASSETS - CONT'D


       b) Licensing rights agreement - cont'd


         Under the terms of the original Cordyceps and De-Daibe agreements
         ("Exclusive Licensing Agreements"), if the Company fails to meet any of
         the licensing commitments, the license agreements will terminate and
         all obligations under the agreements terminate. Upon expiration of the
         Exclusive Licensing agreements Hotway will own the rights to any
         modifications, upgrades or improvements made to the licensed products.

         On November 2, 2004, the Company entered into an agreement with Hotway
         to amend the Exclusive Licensing Agreements (the "Amending Agreement").
         The Amending Agreement amended certain payment terms under the
         Exclusive Licensing Agreements as follows: (1) the Company shall issue
         to Hotway 760,000 shares of common stock; and (2) pay an aggregate of
         $100,000 to Hotway no later than 90 days after the Company's common
         stock has been approved for quotation on the OTC Bulletin Board. Other
         than this consideration, the Company is not required to make royalty or
         any other payments of any kind to Hotway in respect of the Exclusive
         Licensing Agreements. In the event that the Company does not pay or
         issue this consideration to Hotway, then the Exclusive Licensing
         Agreements will terminate and all other obligations under the Exclusive
         Licensing Agreements will terminate. This amendment supercedes the
         previous consideration that the Company owed to Hotway under the
         Exclusive Licensing Agreements. The amendment also provides that the
         Company shall have the exclusive licensing rights on any future
         improvements to the products that are licensed to the Company under the
         Exclusive Licensing Agreements.

         On November 2, 2004, 760,000 common shares with a fair value of $0.25
         each were issued to Hotway representing total consideration of $190,000
         paid in respect of the Exclusive Licensing Agreements. The Company
         charged amortization of $7,125 to operations for the year ended
         December 31, 2004. Management has determined that it is not possible at
         this time to estimate future cash flows to be generated from these
         licences and accordingly an impairment charge equal to the unamortized
         balance of $182,874 has been recorded during the year ended December
         31, 2004 leaving a carrying value of $1.

         During 2005, this licensing agreement was cancelled. The Company is
         attempting to recover the stock and have it cancelled.


                                      F-15
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

3.    INTANGIBLE ASSETS - CONT'D

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

      c) Asset purchase agreement

         Pursuant to an asset purchase agreement dated March 22, 2005, the
         Company acquired from an officer and director, and another person
         related to the officer intellectual rights to 108 "100% Natural Taoist
         Herbal Medicinal Products" that comprise the Company's Taoist Medicine
         product lines. In exchange for the rights, the Company agreed to pay
         total consideration as follows:

     - 4,500,000 common shares with a fair value of $0.30 per share   $1,350,000
     - Payable to shareholders                                            10,000
                                                                       ---------
                                                                      $1,360,000

         In addition, the Company agreed to pay the vendors a royalty equal to
         5% of annual gross sales of the products until March 22, 2039.


         For accounting purposes, the Company has recorded the cost of acquiring
         the intellectual rights as intangible assets at the related party
         vendor's carrying value of $1. The excess of the purchase price over
         the carrying value of the intangible assets totalling $1,359,999 has
         been expensed as research and development costs during the year ended
         December 31, 2005.

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

4.    PROPERTY AND EQUIPMENT

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

    Property and equipment consists of the following:

                                                      December 31,  December 31,
                                                           2005          2004

                                                             $             $

           Computer                                       16,688         5,766
           Furniture and fixtures                          2,849           378
                                                         -------       -------
                                                          19,537         6,144

           Less:  accumulated depreciation                (4,906)       (1,012)
                                                         -------       -------

                                                          14,631         5,132
                                                         =======       =======

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

5.     DUE TO SHAREHOLDERS

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

       The amount due to shareholders bears interest at 10% per annum, is
       unsecured and has no specific terms of repayment (Note 8).

                                      F-16
<PAGE>

                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

6.     CAPITAL STOCK

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

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

     The 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.


     The Company has granted stock options as follows:
<TABLE>
<CAPTION>
                                                -------------------- ------------------ -----------------------
                                                                      Weighted Average      Weighted Average
                                                 Number of Options     Exercise price     Remaining Contractual
                                                                              $                   Life
                                                -------------------- ------------------ -----------------------
<S>                                                    <C>                    <C>                  <C>
         Balance December 31, 2003                               -                 -                    -

         Issued during the year                          7,500,000               0.11                    -
         Exercised during the year                        (500,000)              0.10                    -
         Cancelled during the year                        (400,000)              0.10                    -
                                                -------------------- ------------------ -----------------------

         Balance, December 31, 2004                      6,600,000               0.11               3.33 years

         Issued during the year                          3,727,753               0.36                    -
         Exercised during the year                        (348,578)              0.10                    -
         Expired during the year                          (350,000)              0.10                    -
         Cancelled during the year                      (1,650,000)              0.24                    -
                                                 --------------------------------------- ----------------------

         Balance, December 31, 2005                      7,979,175              0.20               2.53 years
                                                ==================== ================== =======================
</TABLE>


     a)   During the first and second quarters of 2005 the Company granted
          1,200,000 stock options to consultants and officers with exercise
          prices ranging from $0.30 to $0.80 subject to immediate vesting for
          terms ranging from one to four years. The Company determined there was
          no intrinsic value attributable to these options as on the day of
          grant the exercise price was equal to or greater than the stock's
          estimated fair value. The Company also concluded that there was no
          reasonably determinable fair value to these options for the following
          reasons: First, at the time of grant the Company's stock was not
          listed for trading on a public stock exchange and there was no other
          established market for the stock. Second, given the Company's early
          stage of development management determined that there were no
          comparable companies or other reliable basis that could be reasonably
          used for selecting assumptions for determining the fair value of
          options granted by application of an option pricing model. Any attempt
          to apply option pricing models would have been based on arbitrary
          assumptions producing unreliable results. Accordingly, management has
          estimated the fair value of these options granted to be nil.


                                      F-17
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

6.       CAPITAL STOCK - CONT'D

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

     b)   During the third quarter of 2005, after obtaining a listing on the OTC
          Bulletin Board, the Company granted 200,000 stock options to
          consultants with an exercise price of $1.00 subject to immediate
          vesting for a term of two years. Stock-based compensation of $190,389
          was recorded as consulting expense during the year ended December 31,
          2005. The fair value of the stock options was estimated by application
          of the fair value method using Black Scholes option pricing model.
          Assumptions used in this model were as follows:

               ----------------------------------------- -------------
               Risk-free interest rate                           3.5%
               ----------------------------------------- -------------
               Dividend yield                                      0%
               ----------------------------------------- -------------
               Volatility factor                                 179%
               ----------------------------------------- -------------
               Expected option life                           2 years
               ----------------------------------------- -------------

     c)   The Company granted 250,000 stock options to a consultant with an
          exercise price of $1.00. During the year ended December 31, 2005, the
          options were cancelled before the expiry of three-month probation
          period. Accordingly, no stock-based compensation was recorded in
          respect of these options.

     d)   On November 1, 2005, the Company granted 300,000 stock options to a
          consultant with an exercise price of $0.50 subject to immediate
          vesting for a term of one year. Stock-based compensation of $58,224
          was recorded as consulting expense during the year ended December 31,
          2005. The fair value of the stock options was estimated by application
          of the fair value method using Black-Scholes option pricing model.
          Assumptions used in this model were as follows:

               ----------------------------------------- -------------
               Risk-free interest rate                          4.14%
               ----------------------------------------- -------------
               Dividend yield                                      0%
               ----------------------------------------- -------------
               Volatility factor                                 179%
               ----------------------------------------- -------------
               Expected option life                            1 year
               ----------------------------------------- -------------

     e)   On December 18, 2005 the Company granted 1,000,000 stock options to a
          director with an exercise price of $0.20 subject to immediate vesting
          for a term of four years. Stock-based compensation equal to the
          intrinsic value of the options of $9,910 was recorded as consulting
          expense. The fair value of the stock options was estimated by
          application of the fair value method using Black-Scholes option
          pricing model and the fair value of $207,216 was included in the
          calculation of pro-forma net loss. Assumptions used in this model were
          as follows:

               ----------------------------------------- -------------
               Risk-free interest rate                          3.76%
               ----------------------------------------- -------------
               Dividend yield                                      0%
               ----------------------------------------- -------------
               Volatility factor                                 179%
               ----------------------------------------- -------------
               Expected option life                           4 years
               ----------------------------------------- -------------

     f)   On December 23, 2005 the Company granted 500,000 stock options to a
          consultant with an exercise price of $0.15 subject to immediate
          vesting for at term of two years. Stock-based compensation of $80,639
          was recorded as consulting expense during the year ended December 31,
          2005. The fair value of the stock options was estimated by application
          of the fair value method using Black Scholes option pricing model.
          Assumptions used in this model were as follows:

               ----------------------------------------- -------------
               Risk-free interest rate                          3.71%
               ----------------------------------------- -------------
               Dividend yield                                      0%
               ----------------------------------------- -------------
               Volatility factor                                 179%
               ----------------------------------------- -------------
               Expected option life                           2 years
               ----------------------------------------- -------------

                                      F-18
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005


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

6.       CAPITAL STOCK - CONT'D

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

     g)   On December 23, 2005 the Company granted 277,753 stock options to a
          director with an exercise price of $0.15 subject to immediate vesting
          for a term of two years. Stock-based compensation equal to the
          intrinsic value of the options of $5,505 was recorded as consulting
          expense. The fair value of the stock options was estimated by
          application of the fair value method using Black Scholes option
          pricing model and the fair value of $44,796 was included in the
          calculation of pro forma net loss. Assumptions used in this model were
          as follows:

               ----------------------------------------- -------------
               Risk-free interest rate                          3.71%
               ----------------------------------------- -------------
               Dividend yield                                      0%
               ----------------------------------------- -------------
               Volatility factor                                 179%
               ----------------------------------------- -------------
               Expected option life                           2 years
               ----------------------------------------- -------------

     h)   On December 23, 2005 the Company granted 1,000,000 Series A preferred
          stock options to the Company's President with an exercise price of
          $0.15 subject to immediate vesting. The Company determined that the
          fair value attributable to these options was not readily determinable
          and a nil value was attributed to this option for the following
          reasons. First, there is no immediate market for the Series A
          preferred shares. Second, the conversion feature of the Series A
          preferred stock can be exercised only if the market price of the
          Company's common stock is greater than $1.00. On the date of grant the
          market price was approximately $.15 indicating significant uncertainty
          that the conversion feature will be available. Finally, management has
          determined that the underlying fair value of the net assets
          attributable to these shares does not exceed the exercise price.

                                      F-19
<PAGE>

                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005
--------------------------------------------------------------------------------

6.       CAPITAL STOCK - CONT'D

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

     The Company has issued share purchase warrants as follows:

                                                Number of     Weighted Average
                                                 Warrants       Exercise Price
         Balance, April 3, 2002                         -            $    -

         Issued during the period (i)              19,000              0.75
                                                   ------             -----

         Balance, December 31, 2002                19,000              0.75

         Issued during the year (ii)              100,000              0.11
                                                  -------              ----

         Balance, December 31, 2003               119,000              0.22

         Issued during the year (iii)             220,000              0.75
                                                  -------              ----

         Balance, December 31, 2004               339,000              0.56

         Issued during the year (iv)            1,080,000              0.75
         Expired during the year                 (239,000)             0.75
                                                 ---------             ----

         Balance December 31, 2005              1,180,000              0.71
                                                =========              ====


     i)   During 2002, the Company issued 19,000 units at $0.10 per unit. Each
          unit consisted of one common share and one share purchase warrant.
          Each warrant entitles the holder to purchase an additional common
          share for $0.75 and must be exercised within six months of the date
          the Company's shares commence trading on a United States Stock
          exchange. These warrants were not exercised, and expired in full
          during fiscal 2005.

     ii)  During 2003, the Company issued 100,000 units at $0.08 per unit. Each
          unit consisted of one common share and one share purchase warrant.
          Each warrant entitles the holder to purchase an additional common
          share for $0.11 and must be exercised within two years of the date the
          Company's shares commence trading on a United States Stock exchange.

     iii) During 2004, the Company issued 220,000 units at $0.25 per unit. Each
          unit consisted of one common share and one share purchase warrant.
          Each warrant entitles the holder to purchase an additional common
          share for $0.75 and must be exercised within one year. These warrants
          were not exercised, and expired in full during fiscal 2005.

     iv)  During 2005, the Company issued 1,080,000 units at $0.25 per unit.
          Each unit consisted of one common share and one share purchase
          warrant. Each warrant entitles the holder to purchase an additional
          common share for $0.75 and must be exercised within one year of the
          date the Company's shares commence trading on a United States Stock
          exchange.


                                      F-20
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005
--------------------------------------------------------------------------------

7.       SUPPLEMENTARY NON-CASH INFORMATION

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

     The Company entered into the following non-cash transactions:

          a.   During 2005, the Company issued 4,500,000 common shares with a
               fair value of $0.30 per share as partial consideration for the
               purchase of licensing rights. (See Note 3 (c)).

          b.   During 2005, the Company issued 4,567,900 common shares with fair
               values ranging from $0.15 to $0.62 per share for a total value of
               $1,392,297 of which $1,046,942 was recorded as consulting and
               management fee expenses, $261,000 as deferred compensation,
               $9,355 as a loss on settlement of debt, and $75,000 as
               professional fees.

          c.   During 2005, the Company issued 277,753 common shares with a fair
               value of $47,218 to settle debt. The difference between the face
               value of the amount payable and the total fair value of the
               shares issued, which amounted to $5,373, was recorded as loss on
               debt settlement and issuance of shares.

          d.   During 2005, the Company issued 348,578 common shares upon the
               exercise of options at a price of $0.10 per share.

          e.   During 2005, the Company issued 1,000,000 shares of Series A
               Preferred Stock with a fair value of $0.15 per share to settle
               debt of $150,000 owed to the President of the Company.

          f.   During 2004, the Company issued 1,000,000 common shares with a
               fair value of $0.25 per share pursuant to a two-year consulting
               agreement. In 2004, $46,875 was recorded as consulting fees and
               $203,125 was recorded as deferred compensation. Pursuant to the
               same agreement, the Company granted 1,000,000 stock options to
               the consultant with an exercise price of $0.10 per share. These
               options were granted in respect of a contract that required
               services to be performed over a two year term. The fair value of
               these options at the date of grant was estimated to be $150,000.
               In 2004, $9,375 was recorded as a consulting fee and $140,625 was
               recorded deferred compensation.

               During 2005, this services agreement was terminated and 700,000
               out of the 1,000,000 common shares issued in 2004 were cancelled
               by way of written agreement. Accordingly, $28,125 was recorded as
               consulting fees and $175,000 worth of common stock was cancelled.
               The Company intends to retrieve the stock certificates. Both
               parties also agreed to cancel the 1,000,000 stock options granted
               in 2004. During 2005, the balance of $140,625 deferred
               compensation was recorded as consulting fees.

          g.   During 2004, the Company issued 760,000 common shares with a fair
               value of $0.25 per share as partial consideration of $190,000 for
               the purchase of intangible assets of 19 Cordyceps products and
               the De-Daibe and Depressor Herbs products from Hotway (see Note 3
               (b)).

          h.   During 2004, the Company issued 2,200,000 common shares with a
               fair value of $0.87 per share and a $175,000 promissory note
               payable as consideration for the purchase of intangible assets
               (see Note 3 (a)). As at December 31, 2004, notes payable included
               accrued interest of $10,206.

          i.   During 2004, the Company issued 1,000,000 common shares with a
               fair value of $0.25 per share for legal services. For the ended
               December 31, 2004, $250,000 was recorded as professional fees.

                                      F-21
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

7.    SUPPLEMENTARY NON-CASH INFORMATION - CONT'D

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

          j.   During 2004, the Company issued 231,000 common shares with fair
               values ranging from $0.001 to $0.25 for a total value of $49,815
               to pay for consulting services.

          k.   During 2004, the Company issued 310,000 common shares with a fair
               value of $18,800 to settle debt with a face value of $10,380. The
               difference between the face value of the amount payable and the
               total fair value of the shares issued, which amounted to $8,420,
               was recorded as loss on debt settlement.

          l.   During 2004, 70,064 stock options were exercised at a price of
               $0.25 per share for a total subscription price of $17,516 which
               was settled by cancelling a debt owed to the subscriber in the
               amount of $17,516.

          m.   During 2004, the Company issued 1,336,700 common shares with a
               fair value of $125,821 for total cash consideration of $84,944.
               The difference between the cash received and the total fair value
               of the shares issued amounted to $40,877, of which $20,877 was
               recorded as loss on debt settlement and $20,000 was recorded as
               consulting fees.

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

8.    RELATED PARTY TRANSACTIONS

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

     The Company has entered into the following related party transactions:

     a)   Accrued management and consulting fee to directors and certain
          significant shareholders totalling $246,061 (2004 - $328,438);

     b)   Accrued interest expense to directors and shareholders totalling
          $45,305 (2004 - $19,734);

     c)   Recorded sales to directors and shareholders totalling $1,671 (2004 -
          $7,305);

     d)   Acquired intellectual property and paid research and development costs
          to directors and certain significant shareholders with a total cost of
          $1,360,000 (2004 - $366,307) (see Notes 3 and 7).

     e)   During 2005, the Company issued 1,000,000 Series A preferred shares
          with a fair value of $0.15 per share to settle debt of $150,000 owed
          to the President of the Company.

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

9.    COMMITMENTS

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

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

          -    pay a monthly management fee of $18,000 to the Company's
               President starting on April 1, 2005 and pay a 3% royalty on gross
               sales of the Company.
          -    pay a monthly consulting fee of $6,000 to a shareholder and
               officer of the Company.
          -    pay a monthly consulting fee of $7,500 for investor relations
               services.
          -    issue 100,000 common shares as compensation for consulting
               services to an officer in March 2006.


                                      F-22
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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

10.    INCOME TAXES

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

       The Company has net operating loss carry forwards for income taxes
       purposes amounting to approximately $1,378,000 as of December 31, 2005
       (2004- $855,000) which may be available to reduce future years' taxable
       income. These carry forwards will expire, if not utilized, commencing in
       2022. Management believes that the realization of the benefits from these
       losses appears uncertain due to the Company's limited operating history
       and continuing losses. Accordingly, a full deferred tax asset valuation
       allowance has been provided and no deferred tax asset benefit has been
       recorded. During the fiscal year ended December 31, 2005, the valuation
       allowance increased by $457,000.


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11.    LOSS ON SETTLEMENT OF DEBTS AND ISSUANCE OF SHARES

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

       During the year ended December 31, 2005 and 2004, the Company issued
       shares to settle outstanding debts. At the time of issuing these shares
       the fair value of certain of theses shares was greater than the face
       amount of the debt being settled. The difference between the fair value
       of these shares and the face value of the debt was recorded as a loss on
       settlement of debt which amounted to $14,728 in 2005 and $8,420 in
       2004.(see Note 7).

       During the year ended December 31, 2004, the company issued shares for
       cash consideration when, at the time of issuing the shares, the fair
       value of the shares was greater than the cash consideration received. In
       2004 the difference amounted to $40,877 of which $20,877 was recorded as
       a loss on settlement of debt and issuance of shares and $20,000 was
       recorded as consulting fees (see Note 7).

       The total loss on settlement of debt and issuance of shares as reported
       in the statement of operations was $14,728 in 2005 and $29,297 in 2004.

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12.    SUBSEQUENT EVENTS

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     a)   On January 16, 2006, the Company entered into a letter of intent,
          effective January 27, 2006, with WangJing Hospital and WangJing
          Hospital of China Academy of Chinese Medical Sciences, located in
          Beijing, China, for the worldwide development of the China
          International University of Traditional Chinese Medicine and the
          University Hospital for Traditional Chinese Medical Sciences (the
          "Project"). Pursuant to the Letter of Intent, the parties agreed to
          pursue the co-development of the Project on a worldwide basis for a
          five (5) year period following execution of the Letter of Intent.
          Further, WangJing Hospital and WangJing Hospital of China Academy of
          Chinese Medical Sciences have agreed to provide the Company with full
          intellectual and scientific and medical and technical support for
          further development of the Project, while the Company has agreed to be
          responsible for further investment capital and business development
          for the Project. The parties have agreed to further discuss and
          negotiate the detailed terms for the development of the Project, and
          expect that any such agreement shall be made in a formal agreement to
          be entered into between the parties.

     b)   On January 17, 2006, the Company issued 250,000 common shares with a
          fair value of $0.12 per share for $30,000 of consulting services.

     c)   On January 18, 2006, the Company issued 300,000 common shares with a
          fair value of $0.11 per share for $33,000 of management consulting
          services.

     d)   On January 22, 2006, the Company issued 250,000 common shares with a
          fair value of $0.12 per share for $30,000 of consulting services.

                                      F-23
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2005

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12.    SUBSEQUENT EVENTS - CONT'D

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     e)   On January 22, 2006, the Company issued 134,710 common shares with a
          fair value of $0.12 per share for settlement of $16,165 of debt.

     f)   On February 1, 2006, the Company issued 90,000 common shares with a
          fair value of $0.25 per share for $22,500 of consulting services.

     g)   On February 7, 2006, the Company granted 150,000 common stock options
          exercisable at $1.00 and expiring on July 20, 2007.

     h)   On February 14, 2006, the Company issued 100,000 common shares with a
          fair value of $0.11 per share for $11,000 of legal services.

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

     j)   On February 18, 2006, the Company re-priced the exercise price on
          100,000 outstanding stock options from $1.00 to $0.30.

     k)   On February 19, 2006, the Company entered into a letter of intent,
          effective February 19, 2006, with Shaanxi WanAn Pharmaceutical Co.
          Ltd. ("Shaanxi") in which the Company was granted the exclusive rights
          and first right of refusal to acquire a 51% or greater interest in
          Shaanxi. The Company must perform due diligence within 60 days of the
          agreement and will pay a combination of cash and common shares for the
          purchase price. The purchase price has not been determined. The
          acquisition will be subject to entering into a formal acquisition
          agreement between the parties.

     l)   On February 21, 2006, the Company issued 300,000 shares with a fair
          value of $0.12 per share for $36,000 of consulting services.

     m)   On February 21, 2006, the Company issued 150,000 shares with a fair
          value of $0.12 per share for $18,000 of administrative services.

     n)   On January 18, 2006, the Company granted 2,500,000 common stock
          options exercisable at $0.15 and expiring on January 18, 2009.

     o)   On January 22, 2006, the Company granted 1,000,000 common stock
          options exercisable at $0.20 and expiring on January 28, 2008.

     p)   On January 22, 2006, the Company granted 1,000,000 common stock
          options exercisable at $0.20 and expiring on December 31, 2008.

     q)   On January 28, 2006, the Company granted 600,000 common stock options
          exercisable at $0.30 and expiring on December 31, 2008.

     r)   On February 1, 2006, the Company granted 1,000,000 common stock
          options exercisable at $0.20 and expiring on February 1, 2008.



                                     F-24