UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


_____________________


FORM
10-Q


_____________________




(Mark
One)




x
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934.




For
the quarter ended March 31, 2008




o
            Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934.




For the
transition period from ________ to __________




Commission
File Number: 000-15893





CHINA
YINGXIA INTERNATIONAL, INC.


(Exact
name of small business issuer as specified in its charter)




Florida
            65-0664961(State
      or other jurisdiction of incorporation or organization)
            (IRS
      Employee Identification No.)





Harbin
      Yingxia Industrial Co., Ltd, No.300, Xidazhi Street Nangang, Harbin
      Heilongjiang F4 150001(Address
      of principal executive offices)





86
      451 86310948(Issuer’s
      telephone number)





c/o
      American Union Securities 100 Wall Street 15th Floor New York, NY
      10005(Address
      of principal agent offices)





(212)
      232-0120(Agent’s
      telephone number)





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




Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
period that the issuer was required to file such reports), and (2)has been
subject to such filing requirements for the past 90 days. Yes   No

  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company filer.
 See definition of “accelerated filer” and “large accelerated filer” in
Rule 12b-2 of the Exchange Act (Check one):


Large Accelerated
      Filer o
            Accelerated Filer
      o
            Non-Accelerated
      Filer o
            Smaller Reporting
      Company x




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




Yes
            o
            No
      x








The
number of shares outstanding of each of the issuer’s classes of common equity,
as of May 15, 2008 is 44,479,787 shares of common
stock.











CHINA
YINGXIA INTERNATIONAL, INC.


FORM
10-Q





TABLE
OF CONTENTS










PART I - FINANCIAL
      INFORMATION
            3Item
      1. Financial Statements
            3Item
      2. Management’s Discussion and Analysis or Plan of
    Operation
            5Item
      3. Quantitative
      and Qualitative Disclosures About Market Risk
            6Item
      4T. Controls
      and Procedures
            6PART
      II - OTHER INFORMATION
            9Item
      1. Legal Proceedings
            9Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
            9Item
      3. Defaults Upon Senior Securities
            9Item
      4. Submission of Matters to a Vote of Security Holders
            9Item
      5. Other Information
            9Item
      6. Exhibits
            9SIGNATURES
            10




Except as otherwise required by the
context, all references in this report to "we", "us”, "our",
“CYXI”, “China
Yingxia” or "Company" refer to the consolidated operations of China Yingxia
International, Inc., a Florida corporation, and its wholly owned
subsidiaries.




1




Explanatory
Note




The
Form 10Q for March 31, 2008 was inadvertently filed without the Sarbanes Oxley
Certifications. This amended 10Q includes the proper
certifications







2






PART
I - FINANCIAL INFORMATION





Item
1.   Financial Statements.




CHINA
YINGXIA INTERNATIONAL, INC.
 
 
 CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
 
 MARCH
31, 2008
   3
  
 CHINA
YINGXIA INTERNATIONAL, INC.
 
 INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
  Condensed
      Consolidated Balance Sheet at March 31, 2008 (unaudited)and
      December 31, 2007(Audited)
                  F-1Condensed
      Consolidated Statements of Income for the three months ended March 31,
      2008 and 2007 (unaudited)
                  F-2Condensed
      Consolidated Statements of Cash Flows for the three months ended March 31,
      2008 and 2007 (unaudited)
                  F-3Notes to Condensed
      Consolidated Financial Statements
                  F-4 -
      F-17
  4








CHINA
YINGXIA INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS
   March
      31, 2008
                  (Unaudited)
                
                
                December
      31, 2007
                  (Audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                2,877,784
                
                
                $
                736,683Account receivables, net of allowance for doubtful
accounts
                
                
                35,401
                
                
                
                20,081Inventory
                
                
                8,680,380
                
                
                
                5,527,135Tax
      Receivable
                
                
                -
                
                
                
                32,317Short-term
      loan receivable
                
                
                -
                
                
                
                2,194,774Other
      receivables
                
                
                1,245,453
                
                
                
                3,150,777Advances
      to suppliers
                
                
                1,705,969
                
                
                
                1,434,059Loan
      Receivable from related parties
                
                
                655,657
                
                
                
                2,037,551Total
      Current Assets
                
                
                15,200,644
                
                
                
                15,133,377Property
      and equipment, net of accumulated depreciation
                
                
                15,953,958
                
                
                
                15,515,896Other
      AssetsDeposits on buildings and land
                
                
                3,026,196
                
                
                
                1,718,077Investment
      Advance
                
                
                4,734,740
                
                
                
                4,112,631Intangible
      assets, net
                
                
                686,452
                
                
                
                666,785Total
      other assets
                
                
                8,447,389
                
                
                
                6,497,493Total
      Assets
                
                $
                39,601,990
                
                
                $
                37,146,766LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                
                $
                114,871
                
                
                $
                2,911Unearned
      revenue
                
                
                38,139
                
                
                
                6,509Tax
      Payable
                
                
                127,845
                
                
                
                -Accrued expenses and other payables
                
                
                303,340
                
                
                
                357,976Total
      Current Liabilities
                
                
                584,195
                
                
                
                367,396Total
      Liabilities
                
                
                584,195
                
                
                
                367,396Stockholders'
      EquityPreferred
      stock, $0.001 par value, 10,000,000 shares authorized; - 0 -
      sharesoutstanding
      at  March 31,2008 and December 31, 2007
                
                
                -
                
                
                
                -Common
      stock, $0.001 par value, 100,000,000 shares authorized;44,479,787
      and 44,439,787 shares outstanding at March 31,2008and
      December 31, 2007, respectively
                
                
                44,480
                
                
                
                44,440Additional
      paid in capital
                
                
                16,841,627
                
                
                
                16,799,667Accumulated
      other comprehensive income
                
                
                4,369,093
                
                
                
                2,885,038Statutory
      reserves
                
                
                901,463
                
                
                
                901,463Retained
      earnings
                
                
                16,861,132
                
                
                
                16,148,762Total
      Stockholders' Equity
                
                
                39,017,795
                
                
                
                36,779,370Total
      Liabilities and Stockholders' Equity
                
                $
                39,601,990
                
                
                $
                37,146,766
   F-1
  CHINA
YINGXIA INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
 For
the three months ended March 31,2008 and 2007
 Three
      Months Ended March 31,2008
                
                
                2007(Unaudited)Sales
                
                $
                2,111,904
                
                
                $
                1,657,891Cost
      of Sales
                
                
                824,634
                
                
                
                790,106Gross
      Profit
                
                
                1,287,270
                
                
                
                867,785Operating
      ExpensesResearch
      & Development Expense
                
                
                -
                
                
                
                -Selling,
      general and administrative
                
                
                490,340
                
                
                
                316,603Income
      before other Income and (Expenses)
                
                
                796,930
                
                
                
                551,182Other
      Income and (Expenses)Subsidy
      Income
                
                
                -
                
                
                
                -Interest
      Income
                
                
                122Other  Income
                
                
                -Other
      Expense
                
                
                (139
                )
                
                
                (43
                )Other
      Income and Expenses
                
                
                (17
                )
                
                
                (43
                )Income
      Before Income Taxes (Benefits)
                
                
                796,913
                
                
                
                551,139Provision
      for Income Taxes (Benefits)
                
                
                84,543Net
      Income
                
                $
                712,370
                
                
                $
                551,139Other
      Comprehensive IncomeForeign
      Currency Translation Adjustment
                
                
                1,484,055
                
                
                
                204,279Comprehensive
      Income
                
                $
                2,196,425
                
                
                $
                755,418Basic
      and Diluted Income per common shareBasic
                
                $
                0.02
                
                
                
                0.02Diluted
                
                $
                0.01
                
                
                
                0.02Weighted
      average common share outstandingBasic
                
                
                44,454,732
                
                
                
                33,608,857Diluted
                
                
                49,711,497
                
                
                
                33,608,857
   F-2
 CHINA
YINGXIA INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For
the three months ended March 31,2008 and 2007
  Three
      Months Ended March 31,2008
                  
                  
                  2007(Unaudited)Cash
      Flows From Operating Activities:Net
      income
                  $
                  712,370
                  
                  $
                  551,139Adjustments
      to reconcile net income to net cashprovided
      by (used in) operating activities:Depreciation
      and amortization
                  
                  238,439
                  
                  
                  166,442Amortization
      of stock-based compensation
                  
                  42,000
                  
                  
                  -Changes
      in operating assets and liabilities:Accounts
      receivable
                  
                  (15,320)
                  
                  
                  (151)Inventory
                  
                  (3,153,245)
                  
                  
                  (178,050)Tax
      Receivable
                  
                  32,317
                  
                  
                  -Prepaid
      expenses
                  
                  -
                  
                  
                  95,479Other
      receivable
                  
                  1,905,324
                  
                  
                  (302,131)Advances
      to suppliers
                  
                  (271,911)
                  
                  
                  (166,483)Accounts
      payable
                  
                  111,960
                  
                  
                  657,518Unearned
      revenue
                  
                  31,630
                  
                  
                  1,295Taxes
      payable
                  
                  127,845
                  
                  
                  34,857Accrued
      expenses and other payables
                  
                  (54,636)
                  
                  
                  (2,423)Cash
      provided by (used in) operating activities
                  
                  (293,227)
                  
                  
                  857,492Cash
      Flows From Investing Activities:Purchase
      of property and equipment
                  
                  (28,151)
                  
                  
                  (1,811)Purchase
      of patent/land use right
                  
                  -
                  
                  
                  (98,579)Investment
      Advance
                  
                  (622,109)
                  
                  
                  -Collection
      of Short term loan
                  
                  2,194,774
                  
                  
                  -Deposits
      on buildings and land
                  
                  (1,308,119)
                  
                  
                  -Collections
      on loans to related party
                  
                  1,381,894
                  
                  
                  265,046Additions
      to construction in process
                  
                  (109,714)
                  
                  
                  (280,360)Cash
      provided by (used in) investing activities
                  
                  1,508,575
                  
                  
                  (115,704)Cash
      Flows From Financing Activities:None
                  
                  -
                  
                  
                  -Cash
      provided by (used in) financing activities
                  
                  -
                  
                  
                  -Effect
      of exchange rate changes on cash and cash equivalents
                  
                  925,753
                  
                  
                  136,016Increase
      in cash and cash equivalents
                  
                  2,141,101
                  
                  
                  877,804Cash
      and Cash Equivalents - Beginning of period
                  
                  736,683
                  
                  
                  77,867Cash
      and Cash Equivalents - End of period
                  $
                  2,877,784
                  
                  $
                  955,671Supplemental
      disclosures of cash flow information:1
                  
                  Interest
      paid
                  $
                  -
                  
                  $
                  -2
                  
                  Income
      Taxes paid
                  $
                  -
                  
                  $
                  -
  F-3
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
   1.  ORGANIZATION
AND DESCRIPTION OF BUSINESS
 
 China
Yingxia International, Inc. (the “Company” or “China Yingxia”) was incorporated
in the State of Florida on May 6, 1996 and formerly known as Agronix, Inc.
(“Agronix”).
  On May
12, 2006, the Company entered into a share exchange agreement with Warner
Nutraceutical International, Inc. (‘WNI”), which is the parent company to Harbin
Yingxia Business Group Co, Ltd. ("Yingxia"). Pursuant to the share exchange
agreement, the Company issued to WNI shareholders 54,811,475 shares of Common
Stock, par value $0.001 per share, and 1,473,649.074 shares of Class A Preferred
Stock, par value $0.001 per share, of which each share is convertible into five
hundred (500) shares of the Company’s Common Stock. As a result of the
transactions, there has been a change in control of the Company as the
shareholders of WNI became the majority shareholders of the
Company.
  For
accounting purpose, the transaction has been accounted for as a reverse
acquisition under the purchase method. Accordingly, WNI and its subsidiary are
treated as the continuing entity for accounting purposes. Following the merger,
Agronix filed a Certificate of Amendment and changed its name to China Yingxia
International, Inc.
  On July
21, 2006, the Company’s board of directors approved a reverse stock split on
both common stock and preferred stock.  Each 24.9 shares of the
Company's Common Stock and Class A Preferred Stock were converted into one (1)
share of Common Stock and one (1) share of Class A Preferred Stock,
respectively. Simultaneously, all of the preferred shares were converted into
common shares at ration of 1 to 500 and the preferred shares were
cancelled.
 The
Company operates its business through its wholly-owned subsidiary Harbin Yingxia
Business Group, Ltd. (" Harbin Yingxia"), a joint stock corporation organized
and existing under the laws of the People's Republic of China (“PRC”) in 1998.
Harbin Yingxia is engaged in the development, manufacture and distribution of
organic nutritional food products and dietary supplements.
  The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Item 310 of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements,
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2008 and 2007 are not
necessarily indicative of the results that may be expected for the full years.
The information included in this Form 10-Q should be read in conjunction with
Management’s Discussion and Analysis and the financial statements and notes to
thereto included in the Company’s 2007 Form 10-KSB.
  F-4
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
  
  2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
  Principles
of consolidation
 
 The
consolidated financial statements of China Yingxia International, Inc. include
the accounts of the Company and its wholly owned subsidiaries, WNI and Harbin
Yingxia.  All significant inter-company balances and transactions are
eliminated in consolidation.
  Basis
of presentation
   The
Company’s condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America (“US GAAP”). This basis of accounting differs in certain material
respects from that used for the preparation of the books of account of the
Company’s principal subsidiary, which are prepared in accordance with the
accounting principles and the relevant financial regulations applicable to
enterprises with limited liabilities established in the PRC, the accounting
standards used in the places of their domicile.  The accompanying
consolidated financial statements reflect necessary adjustments not recorded in
the books of account of the Company’s subsidiary to present them in conformity
with US GAAP.
  
 Use
of estimates
 
 In
preparing the financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting year. Significant estimates, required by management, include the
recoverability of long-lived assets and the valuation of
inventories.  Actual results could differ from those
estimates.
 
 Cash
and cash equivalents
 
 For
purposes of the statement of cash flow, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
   F-5
 
 CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
    2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Accounts
receivables
 
 Accounts
receivables are stated at net realizable value. This value includes an
appropriate allowance for estimated uncollectible accounts. The allowance is
calculated based upon the evaluation and the level of past due accounts and the
relationship with and the economic status of the customers.  The
allowance for doubtful accounts was $120,928 as of March 31,
2008.  The Company does not maintain a large balance of accounts
receivable due to the nature of its business, and the collections on the
Company’s accounts receivable has been generally good. Except for the above
reserved allowance, the Company has not encountered any uncollected accounts
receivable.
 
 Inventories
 
 Inventories
are composed of raw materials and packing materials for manufacturing, work in
process, and finished goods. Inventories are valued at the lower of cost or
market with cost determined on a first-in first-out basis. Management compares
the cost of inventory with the market value and an allowance is made for writing
down the inventory to its market value, if lower than cost.
 
 Property
and equipment
 
 Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation
is computed using the straight-line method over the estimated useful lives as
below:
   Category
                    
                    
                    Estimated Useful LivesMachinery
      & Equipment
                    
                    
                    4-5    yearsAutomobiles
                    
                    
                    7       yearsBuildings
                    
                    
                    15-40
      years
  Advance
to suppliers
 
 Advance
to suppliers represent the payments made and recorded in advance for goods and
services received. The Company makes advances to certain vendors’ inventory
purchases, construction projects and equipment purchases. The advance to
suppliers totaled $1,705,969 as of March 31, 2008.
  F-6
   CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
   2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Impairment
of long-lived assets
   Long-lived
assets, which include property, plant and equipment and intangible assets, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
   Recoverability
of long-lived assets to be held and used is measured by a comparison of the
carrying amount of an asset to the estimated undiscounted future cash flows
expected to be generated by the asset.   If the carrying amount
of an asset exceeds its estimated undiscounted future cash flows, an impairment
charge is recognized by the amount by which the carrying amount of the asset
exceeds the fair value of the assets.  Fair value is generally
determined using the asset’s expected future discounted cash flows or market
value, if readily determinable.
  Income
taxes
 
 The
Company accounts for income tax under the provisions of SFAS No.109 "Accounting
for Income Taxes", which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of the events that have
been included in the financial statements or tax returns.  Deferred
income taxes are recognized for all significant temporary differences between
tax and financial statements bases of assets and
liabilities.  Valuation allowances are established against net
deferred tax assets when it is more likely than not that some portion or all of
the deferred tax asset will not be realized.
 
 The
Company does not have any long-term deferred tax assets or liabilities in China
that will exist once the tax holiday (See Note 10) expires. The Company does not
have any significant deferred tax asset or liabilities that relate to tax
jurisdictions not covered by the tax holiday.
 
 Revenue
recognition
  The
Company recognizes revenue on product sales when products are delivered and the
title passes to the customers and collection is reasonably assured.
   Cost
of revenues
   Cost of
revenues consists primarily of material costs, employee compensation,
depreciation and related expenses, which are directly attributable to the
production of products.  Write-down of inventory to lower of cost or market
is also recorded in cost of revenues.
  F-7
   CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Stock-based
compensation
 
 Effective
January 1, 2007, the Company adopted the provisions of Financial Accounting
Standards Board Statement of Financial Accounting Standards (“SFAS”) No. 123(R),
“Share-Based Payments,” which establishes the accounting for employee
stock-based awards. Under the provisions of SFAS No. 123(R), stock-based
compensation is measured at the grant date, based on the calculated fair value
of the award. And it is recognized as an expense over the requisite employee
service period (generally the vesting period of the grant).
 
 The
Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) 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”.  The fair value of the option
issued is used to measure the transaction, as this is more reliable than the
fair value of the services received.  Fair value is measured as the
value of the Company’s common stock on the date that the commitment for
performance by the counterparty has been reached or the counterparty’s
performance is complete.  The fair value of the equity instrument is
charged directly to compensation expense and additional paid-in
capital.
  Concentration
of credit risk
 
 Financial
instruments that potentially subject the Company to concentration of credit risk
consist primarily of accounts receivable and other receivables.  The
Company does not require collateral or other security to support these
receivables.  The Company conducts periodic reviews of its clients'
financial condition and customer payment practices to minimize collection risk
on accounts receivable.
 
 The
operations of the Company are located in the PRC. Accordingly, the Company's
business, financial condition, and results of operations may be influenced by
the political, economic, and legal environments in the PRC, as well as by the
general state of the PRC economy.
 
 Fair
value of financial instruments
 
 The
carrying amounts of certain financial instruments, including cash and cash
equivalents, accounts receivable, other receivables, accounts payable, accrued
expenses, taxes payable, notes payable and other loans payable approximate fair
value due to the short-term nature of these items.  The carrying
amounts of bank borrowings approximate the fair value based on the Company's
expected borrowing rate for debt with similar remaining maturities and
comparable risk.
  F-8
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
   2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Foreign
currency translation
  The
Company’s functional currency is the Renminbi (“RMB”). For financial reporting
purposes, RMB has been translated into United States dollars ("USD") as the
reporting currency. Assets and liabilities are translated at the exchange rate
in effect at the balance sheet date. Revenues and expenses are translated at the
average rate of exchange prevailing during the reporting period. Translation
adjustments arising from the use of different exchange rates from period to
period are included as a component of stockholders' equity as "Accumulated other
comprehensive income". Gains and losses resulting from foreign currency
transactions are included in accumulated other comprehensive income. There is no
significant fluctuation in exchange rate for the conversion of RMB to USD after
the balance sheet date.
  Research
and Development
 
 Research
and development costs are related primarily to the Company developing its
intellectual property. Research and development costs are expenses as incurred.
The costs of material and equipment that are acquired or constructed for
research and development activities and have alternative future uses are
classified as plant and equipment and depreciated over their estimated useful
lives.
 
 Start-up
Costs
 
 In
accordance with the American Institute of Certified Public Accountants Statement
of Position 98-5, “Reporting on the Costs of Start-up Activities”, the Company
expenses all costs incurred in connection with the start-up and organization of
the Company.
 
 Earnings
per share
 
 Basic
earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share is computed similar to basic earnings per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.
There are warrants available for dilution purposes as of March 31,
2008
 
 F-9
 
 CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
  2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 New
accounting pronouncements
  In
September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements, where fair value is the relevant
measurement attribute. SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years. The management of the Company is currently evaluating the impact
of adopting SFAS 157 on its consolidated financial statements.
   In
September 2006, the SEC issued SAB No. 108, which provides guidance on the
process of quantifying financial statement misstatements. In SAB No. 108, the
SEC staff establishes an approach that requires quantification of financial
statement errors, under both the iron-curtain and the roll-over methods, based
on the effects of the error on each of the Company’s financial statements and
the related financial statement disclosures. SAB No.108 is generally effective
for annual financial statements in the first fiscal year ending after November
15, 2006. The transition provisions of SAB No. 108 permits existing public
companies to record the cumulative effect in the first year ending after
November 15, 2006 by recording correcting adjustments to the carrying values of
assets and liabilities as of the beginning of that year with the offsetting
adjustment recorded to the opening balance of retained earnings. Management does
not expect that the adoption of SAB No.108 would have a material effect on the
Company’s consolidated financial statements.
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115 (“FAS 159”). FAS 159 permits companies to choose to measure many financial
instruments and certain other items at fair value that   are not currently
required to be measured at fair value. The objective of FAS 159 is to provide
opportunities to mitigate volatility in reported earnings caused by  
measuring related assets and liabilities differently without having to
apply hedge accounting provisions. FAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets
and liabilities. SFAS 159 will be effective in the first quarter of fiscal 2009.
The Company is evaluating the impact that this statement will have on its
consolidated financial   statements.
 
 F-10
 
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been performed. The
Company has adopted FSP EITF 07-3 and expensed the research and development
as it incurred.
 
 In
December 2007, the FASB issued SFAS No. 160,“Noncontrolling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”), which establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
non-controlling interest, changes in a parent’s ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. SFAS
160 is effective for fiscal years beginning after December 15, 2008. The Company
has not determined the effect that the application of SFAS 160 will have on its
consolidated financial statements.
 
 In
December 2007, Statement of Financial Accounting Standards No. 141(R), Business Combinations, was
issued. SFAS No. 141R replaces SFAS No. 141, Business Combinations.SFAS
141R retains the fundamental requirements in SFAS 141 that the acquisition
method of accounting (which SFAS 141 called the purchase method) be used for
all business combinations and for an acquirer to be identified for each business
combination. SFAS 141R requires an acquirer to recognize the assets acquired,
the liabilities assumed, and any non-controlling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions. This replaces SFAS 141’s cost-allocation process, which required the
cost of an acquisition to be allocated to the individual assets acquired
and liabilities assumed based on their estimated fair values. SFAS 141R also
requires the acquirer in a business combination achieved in stages (sometimes
referred to as a step acquisition) to recognize the identifiable assets and
liabilities, as well as the non-controlling interest in the acquiree, at the
full amounts of their fair values (or other amounts determined in accordance
with SFAS 141R). SFAS 141R applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. An entity may not
apply it before that date. The Company is currently evaluating the impact that
adopting SFAS No. 141R will have on its financial statements.
 
 3.   INVENTORY
 
 March
      31, 2008
                  
                  
                  December
      31, 2007Packing
      Materials
                  
                  $
                  63,688
                  
                  
                  $
                  102,707Raw
      Materials
                  
                  
                  5,937,207
                  
                  
                  
                  2,660,601Work
      in process
                  
                  
                  321,795
                  
                  
                  
                  210,864Finished
      Goods
                  
                  
                  2,357,690
                  
                  
                  
                  2,552,963Total
                  
                  $
                  8,680,380
                  
                  
                  $
                  5,527,135
 
 
 No
allowance for inventory was made for the three months ended March 31, 2008 and
2007.
  F-11
   CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 
 4.   PROPERTY,
PLANT AND EQUIPMENT, NET
 
 Property,
plant and equipment consist of the following at March 31, 2008 and December 31,
2007:
 
 March
      31, 2008
                  
                  
                  December
      31, 2007Machinery
      & Equipment
                  
                  $
                  3,051,898
                  
                  
                  $
                  2,906,024Automobiles
                  
                  
                  421,378
                  
                  
                  
                  405,054Buildings
                  
                  
                  
                  13,896,910
                  
                  
                  
                  13,358,530Sub
      total
                  
                  
                  
                  17,370,186
                  
                  
                  
                  16,669,608Less:
      Accumulated Depreciation
                  
                  
                  (3,743,995
                  )
                  
                  
                  (3,371,764
                  )Construction
      in progress
                  
                  
                  2,327,766
                  
                  
                  
                  2,218,052Total
      property, plant & Equipment, net
                  
                  $
                  15,953,958
                  
                  
                  $
                  15,515,896
 
 Depreciation
expense for the three months ended March 31, 2008 and 2007 was $231,384 and
$166,442, respectively.
 
 5.
                  INTANGIBLE
      ASSETS
 
 Intangible
assets include land use right and patent right.
 
 Land use
right – all land in the People’s Republic of China is government owned and
cannot be sold to any individual or company. Instead, the government grants the
user a “Land use right” (the Right) to use the land. The Company has the right
to use the land for 50 years and amortized the Right on a straight-line basis
over 50 years.
 
 Patent –
capitalized patent costs represent the acquisition costs paid for exclusive use
of the patented organic rice seeds.  Capitalized patent costs are
amortized on a straight method over the related patent term of 15
years.
 
 Net
intangible assets at March 31, 2008 and December 31, 2007 were as
follows:
 
 
 March
      31, 2008
                  
                  
                  December
      31, 2007Land
      use right
                  
                  $
                  441,370
                  
                  
                  $
                  424,271Patent
                  
                  
                  285,225
                  
                  
                  
                  274,175Less:
      Accumulated amortization
                  
                  
                  (40,143
                  )
                  
                  
                  (31,661
                  )Intangible
      assets, net
                  
                  $
                  686,452
                  
                  
                  $
                  666,785
 
 Amortization
expense for the three months ended March 31, 2008 and 2007 amounted to $7,055
and $0, respectively.
 
 6.  OTHER
RECEIVABLES
 
 Other
receivables typically represent cash advances to employees and sales
representatives for normal business purposes. As of March 31, 2008 the Company
has other receivables in the amount of US$1,245,453. Considering some of the
cash advance need to be reclassified as expense reimbursements, an allowance in
the amount of $478,415 was recorded as of March 31, 2008.
   F-12
    CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 7.
RELATED PARTY LOANS
 
 As of
March 31, 2008, the Company has loans receivable from related parties in the
amount of $655,657. All related party loans are provided to the affiliated
retail stores or companies to facilitate the initial establishment of their
businesses for selling the Company’s products. These loans are interest free and
unsecured and are due upon demand. The Company expects to collect most of the
outstanding loans in the next few months.
  8.  DEPOSITS
ON BUILDINGS AND LAND
 
 The
Company made separate deposits in the total amount of RMB21,219,685
(approximately US$ 3,026,196) on one building in Harbin, one office space in
Beijing and a piece of land in Anhui Province it intends to purchase. All
purchases are evidenced by purchase agreements and the transactions were not
finalized as of March 31, 2008. Once the Company completes the title transfers,
the deposits will be reclassified to Property, Plant and Equipment
account.
 
 9.
INVESTMENT ADVANCE
 
 a)  On
December 5, 2007, the Company (“Buyer”) signed an agreement (“Agreement”) with
Shanghai Jin Ao Food Co., Ltd. (“Seller”) to purchase its six (6) Soybean Milk
production lines for a total amount of RMB 30,000,000 (approximately US$4.1
million), including production equipments, technique know-how and marketing
resources. The Company (“Buyer”) made three installment payments of the full
purchase price before January 31, 2008.  Though the ownership of the
equipments have been transferred to the Company, the related resources such as
marketing and distribution have not been completed, therefore, the Company
recorded the entire amount as investment advance as of March 31,
2008.  Upon closing of this transaction, the Company will reclassify
the amount to fixed assets and other related accounts.
 
 b) On
January 23, 2008, the Company registered ‘China Xianhe India Private Limited” in
New Deli, India. RMB2,000,000 (approximately US$285,225) was made an advance as
initial start up cost as of March 31, 2008.  The Company is expected
to expand its dietary supplement products into Indian market in the next several
months.
 
 c) On
February 28, 2008, the Company signed a letter of Intent with Guangzhou Chichi
Network Technology Development Co., Ltd. (“Guangzhou Technology”), and Guangzhou
Chichi Network Supermarket Chain Co., Ltd. (“Guangzhou Supermarket Chain”),
together known as the Chichi Wang companies.  Subsequent to this
agreement, the Company spent RMB1,200,000 (approximately US$171,000) to finalize
the acquisition on April 25, 2008.
 
 The
Company is expected to expand its distribution channel, customer base and sales
revenue by utilizing Chi Chi Wang’s online network in Southern
China.
 
 10.  INCOME
TAXES
 
 The
Company is governed by the Income Tax Law of the People’s Republic of China
concerning the private-run enterprises, which are subject to tax at a statutory
rate of 25% and were, until January 2008, subject to tax at a statutory rate of
33% (30% state income tax plus 3% local income tax) on its taxable
income.
 
 In 2006,
the Company has obtained its foreign-owned entity (“WOFE”) status upon
completion of the reverse acquisition. According to the Provisional Regulations
of the People’s Republic of China on Income Tax, the Document of Reductions and
Exemptions of Income Tax for the Company has been approved by the local tax
bureau and the Management Regulation of Harbin Economic and Technological
Development Zone for the reporting period. The Company was granted the status of
WOFE and therefore is exempt from income tax from January 1, 2004 through
December 31, 2007. The Company has also been approved to have its tax rate
reduced by 50% from January 1, 2008 to December 31, 2010.
 
 On
March 16, 2007, the National People’s Congress of China approved the
Corporate Income Tax Law of the People’s Republic of China (the “New CIT Law”),
which is effective from January 1, 2008. Under the new CIT law, the
corporate income tax rate applicable to all Companies, including both domestic
companies and foreign-invested companies, is 25%, replacing the prior applicable
tax rate of 33%. However, companies previously being approved for any income
holiday will not be subject to the new enacted tax rate until the holiday runs
out.
 
 To
continue with its WOFE tax holiday of tax rate reduction by 50% for three years,
the Company is subject to 12.5% of income tax rate from January 1, 2008 to
December 31, 2010.  For the three months ended March 31, 2008, the
Company has income tax provision of US$84,543
   F-13
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
   11.
STATUTORY RESERVES
 
 Pursuant
to the laws of People’s Republic of China, the Company is required to maintain
certain statutory reserves by appropriating from its after-tax profit before
declaration or payment of dividends. The statutory reserves include surplus
reserve fund, common welfare fund and the enterprise fund. These statutory
reserves represent restricted retained earnings.
 
 Surplus reserve
fund
 
 The
Company is generally required to transfer 10% of its net income, as determined
under PRC accounting rules and regulations, to a statutory surplus reserve fund
until such reserve balance reaches 50% of the Company’s registered capital.
However, the laws exclude the companies owned by foreign entities. The Company’s
operating subsidiary, Harbin Yingxia, became a foreign owned entity in 2007 upon
acquisition by the Company. Therefore, it is exempted from making any more
mandatory reserves. It is at the management’s discretion whether to make any
additional reserves.  For the three months ended March 31, 2008, the
Company elected not to make any additional funds to this reserve.
 
 The
surplus reserve fund is non-distributable other than during liquidation and can
be used to fund previous years ’ losses, if any, and may be utilized for
business expansion or converted into share capital by issuing new shares to
existing shareholders in proportion to their shareholding or by increasing the
par value of the shares currently held by them, provided that the remaining
reserve balance after such issue is not less than 25% of the registered
capital.
 
 Common welfare
fund
 
 The
Company is required to transfer 5% to 10% of its net income, as determined in
accordance with the PRC accounting rules and regulations, to the statutory
common welfare fund. Making any additional common welfare reserve becomes
voluntary for the Company because its foreign entity status. For the three
months ended March 31, 2008, the Company elected not to make any additional
funds to this reserve.
 
 This fund
can only be utilized on capital items for the collective benefit of the Company
’ s employees, such as construction of dormitories, cafeteria facilities, and
other staff welfare facilities. This fund is non-distributable other than upon
liquidation.
  F-14
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
  11.
STATUTORY RESERVES (Continued)
 
 Enterprise
fund
 
 The
enterprise fund may be used to acquire fixed assets or to increase the working
capital to expend on production and operation of the business. No minimum
contribution is required and the Company did not make any contribution to this
fund during the three months ended March 31, 2008
 
 The
following represents the accumulated balances of the appropriations as of March
31, 2008:
  Surplus
      Reserve
                  
                  $
                  600,975Common Welfare
      Reserve
                  
                  
                  300,488Total
                  
                  $
                  901,463
 
  12.
SEGMENT REPORTING
 
 The
company operates in one operating segment in accordance with the provisions of
SFAS No. 131, “Disclosures about Segments of an Enterprise and Related
Information”. Although the Company develops, manufactures and commercializes
various products such as nutritional food products, dietary supplements,
cosmetic products, raw cactus plants and personal care products etc., the
Company’s chief operating decision maker reviews and evaluates one set of
combined financial information deciding how to allocate resources and in
assessing performance.
 
 For the
three months ended March 31, 2008 and 2007, the Company’s sales revenue from
various products are as follows:
 
 March
      31, 2008
                  
                  
                  March
      31, 2007Nutritional
      Food Products
                  
                  $
                  745,100
                  
                  
                  $
                  345,687Dietary
      Supplements
                  
                  
                  1,229,945
                  
                  
                  
                  392,186Cosmetic
      Products
                  
                  
                  103,711
                  
                  
                  
                  54,439Raw
      cactus plants
                  
                  
                  13,665
                  
                  
                  
                  -Personal
      Care Products & others
                  
                  
                  19,483
                  
                  
                  
                  865,579Total
                  
                  $
                  2,111,904
                  
                  
                  $
                  1,657,891
  All the
Company’s revenue were generated in China. The Company’s sales in foreign
nations represent pilot programs that as of yet have not become full-scale
operations.
  F-15
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 13. STOCKHOLDERS’
EQUITY
 
 A.
Issuance of Common
Stock
 
 July
2007 Private Placement
 
 On July
16, 2007, the Company entered into a stock subscription and warrant agreement,
(“Subscription Agreement”), with three (3) accredited investors. Pursuant to the
Subscription Agreement, the investors purchased 1,000,000 units, each unit
consisting of (a) two shares of common stock and (b) one common stock purchase
warrant, at a purchase price of $2.00 per unit. The Company received net
proceeds of $1,980,000 in connection with this private placement.
 
 With the
warrants attached to the units sold in the private placement, the investors are
entitled to purchase an aggregate of 1,000,000 shares of common stock at an
exercise price of $1.50 per share. All these warrants are exercisable for five
years from the effective date of registration statement.
 
 Upon
completion of the placement, the Company incurred approximately $20,000 in legal
and other expenses.
 
 August
2007 Private Placement
 
 On August
9, 2007, the Company completed another private placement of its securities to
accredited investors pursuant to Regulation D under the Securities Act of 1933,
as amended. The Company entered into a stock subscription agreement and warrant
agreement (“Subscription Agreement”), with twenty (20) accredited investors.
Pursuant to the Subscription Agreement, the investors purchased 34.90052 units,
each unit consisting of (a) 250,000 shares of common stock and (b) a 5-year
stock purchase warrant to purchase 125,000 shares of common stock exercisable at
$2.00 per share. The units were sold for a price of $250,000 per unit, yielding
gross proceeds of $8,725,130 from the sale of the units. The Company paid fees
and commissions in the aggregate amount of $1,398,387 in connection with this
offering.
 
 B.
Warrants
 
 Upon the
execution of the both Subscription Agreements, the Company issued to the
investors (i) 1,000,000 warrants under July 2007 Private Placement and
(ii)4,362,565 warrants under August 2007 Private Placement. All warrants do not
contain a cashless exercise provision. Accordingly, in accordance with EITF
00-19, the warrants are classified as equity.
   F-16
   CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 13. STOCKHOLDERS’ EQUITY
(Continued)
 
 The fair
value of the warrants was calculated using the Black-Scholes options pricing
model using the following assumptions: Volatility 63%, risk free interest rate
5.050% for July 2007 Placement and 4.790% for August 2007 Placement, and
expected term of 5 years.
 
 Following
is a summary of the status of warrants outstanding as of March 31,
2008:
 
 Outstanding
      WarrantsExercise
      Price
                  
                  
                  Number
                  
                  
                  Average
      Remaining Life$
                  1.50
                  
                  
                  
                  1,000,000
                  
                  
                  
                  4.25$
                  2.00
                  
                  
                  
                  4,362,565
                  
                  
                  
                  4.335,362,565
  C.
Stock issued for
consulting services
 
 In 2007,
105,800 shares of common stock were issued as full compensation to several
consultants for certain consulting services provided to the Company.  An
amount of $212,744, which represents the aggregate fair value of the shares
issued in excess of par value, was included in additional paid-in capital. The
full amount was expensed and included in the Statements of Income as a part of
general and administrative expenses.
 
 On
February 26, 2008, 40,000 shares of common stock were issued as full
compensation to certain consultants for consulting services provided to the
Company. An amount of $41,960, which represents the aggregate fair value of the
shares issued in excess of par value, was included in additional paid-in
capital. The full amount was amortized and included in the Statements of Income
for the three months ended March 31, 2008 as a part of general and
administrative expenses.
 
 As a
result of these offerings, the Company issued a total of 10,840,930 shares of
its common stock. As of March 31, 2008, there are 44,479,787 shares of common
stock outstanding and no preferred stock.
 
 14.
COMMITMENTS AND CONTINGENCIES
 
 The
Company’s operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in the North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange. The
Company’s results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.
 
 The
Company’s sales, purchases and expenses transactions are denominated in RMB and
all of the Company’s assets and liabilities are also denominated in RMB. The RMB
is not freely convertible into foreign currencies under the current law. In
China, foreign exchange transactions are required by law to be transacted only
by authorized financial institutions at exchange rates set by the People’s Bank
of China, the central bank of China. Remittances in currencies other than RMB
may require certain supporting documentation in order to affect the
remittance.


F-17




Item
2.  Management’s Discussion and Analysis or Plan of Operation.




The
following discussion should be read in conjunction with the Financial Statements
and Notes thereto appearing elsewhere in this Form 10-Q.







Safe Harbor Regarding
Forward-Looking Statements




The
following discussion contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 relating to future events or our future performance. Actual
results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in this
prospectus. Although management believes that the assumptions made and
expectations reflected in the forward-looking statements are reasonable, there
is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual results will not be different from expectations expressed
in this report.





Results of
Operations





For the Three Months Ended March 31,
2008 compared to the Three Months Ended March 31, 2007:





Revenue





The
Company generated $2,111,904  in net sales for the three months
ended March  31, 2008, an increase of $454,013 or 27.38% as
compared to the revenue of $1,657,891 for the three months ended 
March 31, 2007.





A
breakdown of sales by product categories and as a percentage of total sales is
listed below:




Q1
      2008
              Revenue
            
            
            Percentage
      of RevenueNutritional
      Foods
            
            $
            745,100
            
            
            
            35.28
            %Dietary
      Supplements
            
            $
            1,229,945
            
            
            
            58.23
            %Cosmetic
      Products
            
            $
            103,711
            
            
            
            4.91
            %Raw
      cactus plants
            
            $
            13,665
            
            
            
            0.64
            %Personal
      care and other products
            
            $
            19,483
            
            
            
            0.94
            %Total
            
            $
            2,111,904





Nutritional
      Foods
            
            Q1
      2008
              Revenue
            
            
            Percentage
      of Nutritional Foods SalesFunctional
      Organic Rice
            
            $
            27,790
            
            
            
            3.07
            %Soy
      Milk
            
            $
            73,013
            
            
            
            9.79
            %Long
      Gu Millet
            
            $
            37,386
            
            
            
            5.02
            %Dried
      herbal mushrooms
            
            $
            127,239
            
            
            
            17.08
            %Organic
      eggs
            
            $
            125,131
            
            
            
            16.79
            %Nestle
      products
            
            $
            10,274
            
            
            
            1.37
            %Milk
            
            $
            53,276
            
            
            
            7.15
            %Herbal
      black fungus soup and crackers*
            
            $
            85,504
            
            
            
            11.47
            %Fruit
      jam*
            
            $
            65,960
            
            
            
            8.88
            %Soybean
      oil*
            
            $
            25,087
            
            
            
            3.36
            %Honey*
            
            $
            23,263
            
            
            
            3.12
            %







5




Dietary
      Supplements
            
            Q1
      2008
              Revenue
            
            
            Percentage
      of Dietary Supplements SalesCactus
      based supplements
            
            $
            364,187
            
            
            
            29.61
            %Freeze
      dried cactus powder
            
            $
            393,352
            
            
            
            31.98
            %Ginseng
      based supplements
            
            $
            365,917
            
            
            
            29.75
            %





Historically,
we experience in slowdown in our operations during the first quarter of every
calendar year as a result of the calendar new year and Lunar New Year holidays.
Despite this seasonality factor, we have been able to increase revenue and net
income year on year. We achieved this growth during the first quarter of 2008 as
a result of the increase of county level franchisees and also by introducing new
nutritional food products. There were twenty one (21) new stock keeping units
introduced in the first quarter of 2008. These products are all manufactured by
third parties.  Total revenue generated by new products during the
first quarter of 2008 was approximately $233,143. In addition, we were able to
add forty three (43) franchisees new county level franchisees during this
quarter. These franchisees contributed approximately $180,112 to our total
revenue this quarter.





Cost
of Sales





The cost
of sales was $824,634 for the three months ended March 31,
2008, an increase of $34,528 or 4.3% as compared to the
cost of sales of $790,106 for the three months ended March 31,
2007.





As a
percentage of total sales, cost of sales decreased to 39.05% from 47.66% during
the first quarter of 2008 compared to same quarter in 2007. This is a result of
our ability to bring manufacture of products in house which enabled us to better
control our costs of sales. For the first quarter of 2008, products manufactured
in house generated approximately 79.13% of total revenue compared to 36.16% in
the same period in 2007. During the first quarter of 2007, 63.84% of total
revenue came from products which we bought at wholesale prices and distributed
through our franchisees. During the first quarter in 2008, only 20.87% of our
sales were generated from reselling products.




6




Total
Operating Expenses





Total
operating  expenses were $490,340 for the three months ended March 31,
2008,  an increase  of  $173,737 or 54.88% as  compared to
total  operating expenses of  $316,603  for the three 
months  ended  March 31, 2007.  This increase in
operating expenses is primarily due to our fees associated with legal,
accounting, and investor relations services. These expenses related to these
services totaled $123,885 during the first quarter of 2008.








Net
Income





Net
income for the three months ended March 31, 2008 increased to $712,370 or 29.25%
from $551,139 for the three months ended March 31, 2007. Overall increase in net
income for the three months period can be mainly attributed the introduction of
new nutritional food products along with the addition of the forty three (43)
county level franchisees.





Liquidity and Capital
Resources




As of
March 31, 2008, the Company had cash and cash equivalents of $2,877,784, as
compared to $736,683 at December 31, 2007. As of March 31, 2008, the Company had
working capital of $14,616,449, as compared to $14,765,981 as ofDecember 31,
2007.





Net cash
used in operating activities totaled $293,227 for the three months ended March
31, 2008, as compared to cash provided by operating activities of $857,492 for
the three months ended March 31, 2007.


The net
cash used in operations was largely impacted by the increase in inventory of
$3,153,245. During the same period in 2007, spending on inventory only increased
by $178,050. Approximately $2,904,135 of this inventory is the harvested rice
and millet from our Donghai and Hulan production bases.




Net cash
provided by investing activities totaled $1,508,575 for the three months ended
March 31, 2008 as compared to net cash used in of $115,704 for the three months
ended March 31, 2007. During the three month period ended March 31, 2007, we
were able to collect short term loans of $2,194,774 and loans to related parties
of $1,381,894. These collections are related to the loans we made to the farmers
of our Hulan production base to finance the construction of well sinkers during
the drought in 2007.





These
collections offset deposits on buildings and land along with investment advances
made toward the development of our business in southern China with Chi-Chi web
and in India.


On
January 23, 2008, the Company registered ‘China Xianhe India Private Limited” in
New Deli, India.   RMB2,000,000 (approximately US$285,225) was
made an advance as initial start up cost as of March 31,2008.  The
Company is expected to expand its dietary supplement products into Indian market
in the next several months. On February 28, 2008, the Company signed a letter of
Intent with Guangzhou Chichi Network Technology Development Co., Ltd.
(“Guangzhou Technology”), and Guangzhou Chichi Network Supermarket Chain Co.,
Ltd. (“Guangzhou Supermarket Chain”), together known as the Chichi Wang
companies.  Subsequent to this agreement, the Company spent
RMB1,200,000 (approximately US$171,000) to finalize the acquisition on April
25,2008.


Deposits
on buildings and land were related to our sales offices in Beijing and Harbin
along with land in Anhui.





The
Company made separate deposits in the total amount of RMB21,219,685
(approximately US$ 3,026,196) on one building in Harbin, one office space in
Beijing and a piece of land in Anhui Province it intends to purchase. All
purchases are evidenced by purchase agreements and the transactions were not
finalized as of March 31, 2008. Once the Company completes the title transfers,
the deposits will be reclassified to Property, Plant and Equipment
account.





7





Net cash
used in financing activities were nil for the three months ended March 31, 2008
as compared to nil for the three months ended March 31, 2007.




Item
3.  Quantitative and Qualitative Disclosures About Market Risk
 
 The
Company is subject to certain market risks, including changes in interest rates
and currency exchange rates.  The Company does not undertake any specific
actions to limit those exposures.
  Item 4T. Evaluation
of Disclosure Controls and Procedures
 
 Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Accounting Officer (“CAO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation, the
Company’s CEO and CAO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CAO, as appropriate, to allow timely decisions regarding required
disclosure.
  Management’s Report on
Internal Controls over Financial Reporting
  Internal
control over financial reporting is a process to provide reasonable assurance
regarding the reliability of consolidated financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.  There has been no change in
the Company’s internal control over financial reporting during the quarter ended
March 31, 2008 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
  The
Company’s management, including the Company’s CEO and CAO, does not expect that
the Company’s disclosure controls and procedures or the Company’s internal
controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of the
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.
  Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management we identified some material
weaknesses in the company's internal control over financial reporting was
effective as of March 31, 2008.
  We lack
sufficient personnel with the appropriate level of knowledge, experience and
training in the application of accounting operations of our company. This
weakness causes us to not fully identify and resolve accounting and disclosure
issues that could lead to a failure to perform timely internal control and
reviews.
  Management
is currently reviewing its staffing and systems in order to remedy the
weaknesses identified in this assessment. However, because of the above
condition, management's assessment is that the Company's internal controls over
financial reporting were not effective as of March 31, 2008.
 8




PART
II - OTHER INFORMATION


Item
1.    Legal Proceedings.




To the
best of our knowledge, neither the Company nor any of its subsidiaries is a
party to any pending or threatened legal proceedings.




Item
2.    Unregistered Sales of Equity Securities and Use of
Proceeds.




None.




Item
3.    Defaults Upon Senior Securities.




None.




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




None.




Item
5.   Other Information.




None.




Item
6.   Exhibits.




Exhibit No.
            
            Title
      of Document31.1
            
            Certification
      pursuant to Section 302 of Sarbanes Oxley Act of 200232.1
            
            Certification
      pursuant to Section 906 of Sarbanes Oxley Act of
  2002




9









SIGNATURES




In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, there unto duly
authorized.






CHINA
      YINGXIA INTERNATIONAL, INC.Date: May
      15, 2008
              By:
              /s/ Yingxia
    JiaoYingxia
      JiaoChief
      Executive Officer, Chief
      Financial Officer