UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                     ---------------------------------------
                                   FORM 10-QSB

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006


[ ] 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 333-119034

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

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

Securities registered under Section 12(g) of the Exchange Act:

Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [x] No [ ]

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

Yes [ ] No [x]

Total revenues for quarter ended September 30, 2006 were $0.

As of November 13, 2006 there were 81,979,551 shares of issuer's common stock
issued and outstanding and 1,250,000 Series A Preferred Shares issued and
outstanding.
<PAGE>

                           CHINA HEALTH HOLDING, INC.
                                   FORM 10-QSB
                 For the Fiscal Quarter Ended September 30, 2006
                 -----------------------------------------------


Part I                                                                      Page

Item 1.  Financial Statements.                                                4

Item 2.  Management's Discussion and Analysis or Plan of Operations.         25

Item 3.  Controls and Procedures                                             34

Part ll                                                                     Page

Item 1.  Legal Proceedings.                                                  35

Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds          35

Item 3.  Defaults Upon Senior Securities                                     35

Item 4.  Submission of Matters to a Vote of Security Holders.                35

Item 5.  Other Information                                                   35

Item 6. Exhibits.                                                            35

Signatures.                                                                  36


                                       2
<PAGE>
                            CHINA HEALTH HOLDING INC.

                          (a development stage company)

                    CONSOLIDATED INTERIM FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2006
                                   (Unaudited)







    CONSOLIDATED BALANCE SHEETS

    INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

    INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

    NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS



                                       3
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            September 30,
                                                                                                2006
                                                                                                  $           December 31, 2005
                                                                                             (Unaudited)              $
<S>                                                                                              <C>                  <C>
ASSETS

CURRENT ASSETS
    Cash                                                                                         13,520               14,887
    Prepaid expenses                                                                             19,098                5,126
                                                                                           ------------         ------------
Total current assets                                                                             32,618               20,013

PROPERTY AND EQUIPMENT, net (Note 4)                                                             12,108               14,631

INTANGIBLE ASSETS (Note 3)                                                                            3                    3

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

TOTAL ASSETS                                                                                     44,729               34,647

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

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
    Accounts payable and accrued liabilities                                                     49,507               33,785
   Due to shareholders (Note 5)                                                               1,135,285              584,639
                                                                                           ------------         ------------
Total current liabilities                                                                     1,184,792              618,424


COMMITMENTS (Notes 3 and 9)


       Preferred stock, $0.001 par value, 20,000,000 shares authorized,
          1,250,000 (December 31, 2005 - 1,000,000) shares issued and
          outstanding (Note 6)                                                                    1,250                1,000
       Common stock, $0.001 par value, 300,000,000 shares authorized
       68,729,551  (December 31, 2005 - 46,596,931) shares issued and
          outstanding (Note 6)                                                                   68,730               46,597
       Additional paid-in capital                                                             7,261,178            5,676,104
       Deferred Compensation (Note 6 and 7)                                                    (771,774)            (257,514)
       Deficit accumulated during the development stage                                      (7,643,790)          (5,996,301)
       Accumulated other comprehensive loss                                                     (55,657)             (53,663)
                                                                                           ------------         ------------
Total Stockholders' (Deficit)                                                                (1,140,063)            (583,777)
------------------------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)                                                    44,729               34,647

====================================================================================================================================
</TABLE>
                                       4
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                  INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  Cumulative results
                                                                                                                  of operations from
                                            Three Month       Three Month                                       5   April 3, 2002
                                          Period ended       Period ended       Nine Month         Nine Month       (inception) to
                                          September 30,      September 30,     Period ended       Period ended      September 30,
                                              2006               2005       September 30, 2006 September 30, 200         2006
                                                $                  $                 $                 $                  $

<S>                                                   <C>          <C>                 <C>             <C>                  <C>
SALES                                                  -                -                  -                -                 8,976
   Cost of goods sold                                  -                -                  -                -                  (245)
                                             -----------      -----------        -----------      -----------           -----------
                                                       -                -                  -                -                 8,731
                                             -----------      -----------        -----------      -----------           -----------
EXPENSES
   Advertising and promotion                          18           19,626              3,298           65,928               119,145
   Amortization of intangible assets                   -                -                  -                -                 7,125
   Consulting fees (Notes 6 and 7)               142,748          899,495            536,062        1,271,020             2,458,951
   Depreciation                                    1,129            1,039              3,519            2,298                 8,425
   Interest and bank charges (Note 8)             23,427           12,218             61,220           29,844               134,680
   Investor relations                              5,142                -             77,147                -               111,770
   Management fees (Note 7)                      206,213           72,000            730,046          174,000             1,930,442
   Office                                         13,902            2,058             37,987            7,063                64,482
   Professional fees (Note 7)                     21,145           29,239            151,560          182,109               693,665
   Rent                                            4,971            5,507             20,373           15,361                73,942
   Research and development
   (Note 3)                                            -                -                  -                -             1,743,593
   Travel                                             21           11,856              3,933           15,760                30,103
   Vehicle                                         5,023                -             13,132                -                20,824
                                             -----------      -----------        -----------      -----------           -----------
                                                 423,739        1,053,038          1,638,277        1,763,383             7,397,147
                                             -----------      -----------        -----------      -----------           -----------
------------------------------------------------------------------------------------------------------------------------------------
NET LOSS FROM OPERATIONS                        (423,739)      (1,053,038)        (1,638,277)      (1,763,383)           (7,388,416)
OTHER INCOME (EXPENSES)
   Foreign exchange                                 (192)           2,725             (1,331)          (4,559)               20,514
   Impairment of licensing rights (Note 3)             -                -                  -       (1,359,999)             (182,874)
   Gain (Loss) on settlement of debts and
   issuance of  shares (Notes 7)                  (7,881)               -             (7,881)          (9,192)              (93,014)
                                             -----------      -----------        -----------      -----------           -----------

                                                  (8,073)           2,725             (9,212)      (1,373,750)             (255,374)
                                             -----------      -----------        -----------      -----------           -----------

NET LOSS                                        (431,812)      (1,050,313)        (1,647,489)      (3,137,133)           (7,643,790)
                                             -----------      -----------        -----------      -----------           -----------
====================================================================================================================================

BASIC NET LOSS PER SHARE                     $     (0.01)     $     (0.02)       $     (0.03)           (0.08)
====================================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                            62,667,000       43,234,000         58,764,000       41,175,000
====================================================================================================================================
</TABLE>
                                       5
<PAGE>
<TABLE>
<CAPTION>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                                                                             Cumulative results
                                                                                                             of operations from
                                               Three Month       Three Month     Nine Month    Nine Month       April 3, 2002
                                              Period ended      Period ended    Period ended  Period ended     (inception) to
                                              September 30,     September 30,  September 30,  September 30,     September 30,
                                                  2006              2005            2006          2005              2006
                                                    $                 $              $              $                 $

<S>                                                <C>            <C>           <C>           <C>               <C>
OPERATING ACTIVITIES
       Net loss                                    (431,812)      (1,050,313)   (1,647,489)   (3,137,133)       (7,643,790)
       Adjustments to reconcile net loss
       to cash used in operating activities:
          Accrued interest                           22,585           10,915        58,491        28,433           128,652
          Amortization of intangible assets               -                -             -             -             7,125
          Depreciation                                1,129            1,039         3,519         2,298             8,425
          Impairment of licensing rights                  -                -             -             -           182,874
          License rights                                  -                -             -     1,359,999         1,359,999
          Loss on settlement of debts and
            issuance of shares                            -                -             -         9,192            84,476
          Non cash expenses paid with shares        231,143          893,900       667,893     1,342,670         2,939,267
          Stock-based compensation                   34,695                -       413,304       156,056         1,725,487

       Changes in operating assets and
       liabilities
          Prepaid expenses                           (4,133)           7,456        (1,888)            -            21,321
          Accounts payable and accrued
          liabilities                                11,561            5,282        15,722         4,359            57,887
                                                 ----------       ----------    ----------    ----------        ----------
Net cash used in operating activities              (134,832)        (131,721)     (490,448)     (234,126)       (1,128,277)
                                                 ----------       ----------    ----------    ----------        ----------
INVESTING ACTIVITIES
       Purchase of property and equipment                 -           (3,876)            -       (11,160)          (19,736)
                                                 ----------       ----------    ----------    ----------        ----------
Net cash used in investing activities                     -           (3,876)            -       (11,160)          (19,736)
                                                 ----------       ----------    ----------    ----------        ----------


FINANCING ACTIVITIES
       Issuance of common stock                           -                -             -       245,000           513,697
       Net  advances (repayment) from
       shareholders                                 144,542          121,459       492,154         9,631           704,573
                                                 ----------       ----------    ----------    ----------        ----------
Net cash provided by financing activities           144,542          121,459       492,154       254,631         1,218,270
                                                 ----------       ----------    ----------    ----------        ----------

EFFECT OF EXCHANGE RATE CHANGES                          (8)          (3,355)       (3,073)       (1,663)          (56,737)
                                                 ----------       ----------    ----------    ----------        ----------

NET (DECREASE) INCREASE IN CASH                       9,702          (17,493)        1,367         7,682            13,520

CASH, BEGINNING OF YEAR                               4,018           28,686        14,887         3,511                 -
------------------------------------------------------------------------------------------------------------------------------------

CASH, END OF YEAR                                    13,520           11,193        13,520        11,193            13,520

====================================================================================================================================
</TABLE>

SUPPLEMENTARY NON-CASH INFORMATION (Note 7)

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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


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 development of potential merger and
     acquisition opportunities with major pharmaceutical companies in PR China
     and ultimately the development of a pharmaceutical drug pipeline and
     technology. (Note 9)

     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.

     UNAUDITED INTERIM FINANCIAL STATEMENTS

     The accompanying unaudited interim financial statements have been prepared
     in accordance with United States generally accepted accounting principles
     for interim financial information and in accordance with the instructions
     to Form 10-QSB of Regulation S-B. They do not include all information and
     footnotes required by United States generally accepted accounting
     principles for complete financial statements. In the opinion of Management,
     all adjustments considered necessary for a fair presentation, consisting
     solely of normal recurring adjustments, have been made. Operating results
     for the nine months ended September 30, 2006 are not necessarily indicative
     of the results that may be expected for the year ended December 31, 2006.

2.   SIGNIFICANT ACCOUNTING POLICIES

     a)  Basis of presentation

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

         The financial statements have been prepared on the basis of a going
         concern which contemplates the realization of assets and the
         satisfaction of liabilities in the normal course of business. The
         Company has a working capital deficiency of $1,152,174 and a
         stockholders' deficit of $7,643,790 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.


                                       7
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006



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. Accordingly, these factors raise
         substantial doubt about the Company's ability to continue as a going
         concern.

     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

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

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

     e)  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.


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


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) have indefinite
         lives and as such are not subject to amortization and further that no
         impairment of the carrying value of these intangible assets has
         occurred.

         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 an impairment charge 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.


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006



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 September 30, 2006, full
         deferred tax asset valuation allowance has been provided and no
         deferred tax asset benefit has been recorded.

     k)  Stock-based compensation

         Prior to January 1, 2006, the Company accounted for stock-based awards
         under the recognition and measurement provisions of Accounting
         Principles Board Opinion No. 25, "Accounting for Stock Issued to
         Employees" using the intrinsic value method of accounting, under which
         compensation expense was only recognized if the exercise price of the
         Company's employee stock options was less than the market price of the
         underlying common stock on the date of grant. Effective January 1,
         2006, the Company adopted the fair value recognition provisions of SFAS
         No. 123R "Share Based Payments", using the modified retrospective
         transition method. There was no effect on the Company's reported loss
         from operations, cash flows or loss per share as a result of adopting
         SFAS No 123R.

         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>
                                                                            Three Months                   Nine Months
                                                                         Ended September 30,           Ended September 30,
                                                                         2006            2005          2006           2005
                                                                           $              $              $              $
<S>                                                                     <C>           <C>          <C>         <C>
         Net loss -- as reported                                        (436,794)     3,137,133    (1,652,471) (3,137,133)
         Add: Stock-based compensation expense included in net
           loss -- as reported                                                 -             -              -           -
         Deduct: Stock-based compensation expense determined under
           fair value method                                                   -             -              -           -
                                                                        -------------------------------------------------

         Net loss -- pro forma                                          (436,794)   (3,137,133)    (1,652,471) (3,137,133)
                                                                        -------------------------------------------------
         Net loss per share - basic and diluted -- as reported             (0.01)        (0.04)         (0.02)      (0.08)
         Net loss per share - basic and diluted -- pro forma               (0.01)        (0.04)         (0.02)      (0.08)
</TABLE>

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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006



2.   SIGNIFICANT ACCOUNTING POLICIES - CONT'D

     l)  Recent accounting pronouncements

         In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting
         for Defined Benefit Pension and Other Postretirement Plans - an
         amendment of FASB Statements No. 87, 88, 106, and 132(R)". This
         statement requires employers to recognize the overfunded or underfunded
         status of a defined benefit postretirement plan (other than a
         multiemployer plan) as an asset or liability in its statement of
         financial position and to recognize changes in that funded status in
         the year in which the changes occur through comprehensive income of a
         business entity or changes in unrestricted net assets of a
         not-for-profit organization. This statement also requires an employer
         to measure the funded status of a plan as of the date of its year-end
         statement of financial position, with limited exceptions. The
         provisions of SFAS No. 158 are effective for employers with publicly
         traded equity securities as of the end of the fiscal year ending after
         December 15, 2006. The adoption of this statement is not expected to
         have a material effect on the Company's future reported financial
         position or results of operations.

         In September 2006, the FASB issued SFAS No. 157, "Fair Value
         Measurements". The objective of SFAS 157 is to increase consistency and
         comparability in fair value measurements and to expand disclosures
         about fair value measurements. SFAS 157 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 and does not require any new fair value
         measurements. The provisions of SFAS No. 157 are effective for fair
         value measurements made in fiscal years beginning after November 15,
         2007. The adoption of this statement is not expected to have a material
         effect on the Company's future reported financial position or results
         of operations.

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

         In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
         of Financial Assets, an amendment of FASB Statement No. 140, Accounting
         for Transfers and Servicing of Financial Assets and Extinguishments of
         Liabilities". This statement requires all separately recognized
         servicing assets and servicing liabilities be initially measured at
         fair value, if practicable, and permits for subsequent measurement
         using either fair value measurement with changes in fair value
         reflected in earnings or the amortization and impairment requirements
         of Statement No. 140. The subsequent measurement of separately
         recognized servicing assets and servicing liabilities at fair value
         eliminates the necessity for entities that manage the risks inherent in
         servicing assets and servicing liabilities with derivatives to qualify
         for hedge accounting treatment and eliminates the characterization of
         declines in fair value as impairments or direct write-downs. SFAS No.
         156 is effective for an entity's first fiscal year beginning after
         September 15, 2006. This adoption of this statement is not expected to
         have a significant effect on the Company's future reported financial
         position or results of operations.

         In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
         Hybrid Financial Instruments-an amendment of FASB Statements No. 133
         and 140", to simplify and make more consistent the accounting for
         certain financial instruments. SFAS No. 155 amends SFAS No. 133,
         "Accounting for Derivative Instruments and Hedging Activities", to
         permit fair value remeasurement for any hybrid financial instrument
         with an embedded derivative that otherwise would require bifurcation,
         provided that the whole instrument is accounted for on a fair value
         basis. SFAS No. 155 amends SFAS No. 140, "Accounting for the Impairment
         or Disposal of Long-Lived Assets", to allow a qualifying
         special-purpose entity to hold a derivative financial instrument that
         pertains to a beneficial interest other than another derivative
         financial instrument. SFAS No. 155 applies to all financial instruments
         acquired or issued after the beginning of an entity's first fiscal year
         that begins after September 15, 2006, with earlier application allowed.
         This standard is not expected to have a significant effect on the
         Company's future reported financial position or results of operations.


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006



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:


         - 2,200,000 common shares at a fair value of $0.087 per share  $191,307
         - Due to shareholders                                           175,000
                                                                         -------
                                                                        $366,307

         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.



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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


3.   INTANGIBLE ASSETS - CONT'D

     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.


                                       13
<PAGE>

                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


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 and the 760,000
         shares issued in 2004 are to be returned to the Company and cancelled.

     c)  Asset purchase agreement

         Pursuant to an asset purchase agreement dated March 22, 2005, the
         Company acquired from the Company's shareholders intellectual rights to
         108 "100% Natural Taoist Herbal Medicinal Products" 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 at 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 combined total
         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.

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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006



4.   PROPERTY AND EQUIPMENT

    Property and equipment consists of the following:


                                                  September 30,   December 31,
                                                      2006            2005
                                                       $               $

           Computer                                 17,539           16,688
           Furniture and Fixtures                    2,994            2,849
                                                    ------           ------
                                                    20,533           19,537
           Less:  accumulated depreciation          (8,425)          (4,906)
                                                    ------           ------

                                                    12,108           14,631
                                                    ======           ------

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).

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.

     On February 21, 2006, the Company filed a Certificate of Designation,
     Powers Preferences and Rights of Series A preferred stock which authorized
     the Company to issue up to 1,000,000 shares of Series A preferred stock
     with a par value of $0.001 per share. On June 16, 2006 the Company approved
     an increase in the number of authorized Series A Preferred stock to
     2,500,000 with the same par value.

     During the period ended September 30, 2006, the Company issued a total of
     9,615,000 common shares for services at an average of $0.07 per share for a
     total consideration of $626,950.

     During the period ended September 30, 2006, the Company issued a total
     868,388 common shares for corporate expenses at $0.05 per share for a total
     of $39,165.

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


                                       15
<PAGE>

                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


6.   CAPITAL STOCK - CONT'D


     The Company has granted stock options as follows:
<TABLE>
<CAPTION>
                                                               ------------------- ------------------------ -----------------------
                                                                                       Weighted Average         Weighted Average
                                                                Number of Options       Exercise price        Remaining Contractual
                                                               ------------------- ------------------------ -----------------------
<S>                        <C> <C>                                       <C>                      <C>                 <C>
         Balance, December 31, 2005                                      7,979,175                0.20                2.53 years

         Issued during the period                                        6,650,000                0.20                   -
         Cancelled during the period                                    (1,000,000)               0.20                   -
         Expired during the period                                        (900,000)               0.30                   -
                                                               ------------------- ------------------------ -----------------------

         Balance, September 30, 2006                                    12,729,175                0.19                2.22 years
                                                               =================== ======================== =======================

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

         Issued during the period                                        1,650,000                0.63                   -
         Exercised during the period                                       (81,690)               0.10
         Cancelled during the period                                   ( 1,400,000)               0.13                   -
         Expired during the period                                        (350,000)               0.10                   -
                                                              -------------------- ------------------------ ------------------------

         Balance September 30, 2005                                      6,418,310                0.15                2.81 years
                                                              ==================== ======================== ========================

</TABLE>
          a)   On June 12, 2006, the Company increased the number of shares of
               common stock of the Company subject to the Company's 2005 stock
               Incentive plan from 3,900,000 to 9,000,000.

          b)   On January 22, 2006, the Company granted 1,000,000 stock options
               to a consultant with an exercise price of $0.20 per share subject
               to immediate vesting. Stock-based compensation of $40,784 was
               recorded as consulting expense and $74,714 as deferred
               compensation during the nine month period ended September 30,
               2006. The fair value of the stock options was estimated by
               application of the fair value method using Black Scholes option
               pricing model. Assumptions used in this model were as follows:

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

          c)   On January 22, 2006, the Company granted 1,000,000 stock options
               to a consultant with an exercise price of $0.20 per share subject
               to immediate vesting. Stock-based compensation of $26,886 was
               recorded as consulting expense and $88,698 as deferred
               compensation during the nine month period ended September 30,
               2006. The fair value of the stock options was estimated by
               application of the fair value method using Black Scholes option
               pricing model. Assumptions used in this model were as follows:

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


                                       16
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006



6.   CAPITAL STOCK - CONT'D

     d)   On January 22, 2006, the Company granted 2,500,000 stock options to
          the President of the Company with an exercise price of $0.20 per share
          subject to immediate vesting. Stock-based compensation of $280,634 was
          recorded as consulting during the nine month period ended September
          30, 2006. The fair value of the stock options was estimated by
          application of the fair value method using Black Scholes option
          pricing model. Assumptions used in this model were as follows:

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

     e)   On January 28, 2006, the Company granted 1,000,000 stock options to a
          consultant with an exercise price of $0.20 per share subject to
          immediate vesting. Stock-based compensation of $61,565 was recorded as
          consulting expense and $123,383 as deferred compensation during the
          nine month period ended September 30, 2006. The fair value of the
          stock options was estimated by application of the fair value method
          using Black Scholes option pricing model. Assumptions used in this
          model were as follows:

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

     f)   On February 1, 2006, the Company granted 1,000,000 stock options to a
          consultant with an exercise price of $0.20 per share subject to
          immediate vesting. Stock-based compensation of $80,488 was recorded as
          consulting expense and $163,984 as deferred compensation during the
          nine month period ended September 30, 2006. The fair value of the
          stock options was estimated by application of the fair value method
          using Black Scholes option pricing model. Assumptions used in this
          model were as follows:

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

     g)   On February 7, 2006, the Company granted 150,000 stock options to a
          consultant with an exercise price of $0.30 per share subject to
          immediate vesting. Stock-based compensation of $9,463 was recorded as
          consulting expense and $11,872 as deferred compensation during the
          nine month period ended September 30, 2006. The fair value of the
          stock options was estimated by application of the fair value method
          using Black Scholes option pricing model. Assumptions used in this
          model were as follows:

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

                                       17

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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


a.   CAPITAL STOCK - CONT'D

     h)   During the nine month period ended September 30, 2006, the Company
          decreased the exercise price of 100,000 stock options granted to a
          consultant during the year ended December 31, 2005, from $1.00 per
          share to $0.30 per share. Stock-based compensation of $1,186 was
          recorded as consulting expense and $1,488 as deferred compensation
          during the nine month period ended September 30, 2006. The fair value
          of the stock options was estimated by application of the fair value
          method using Black Scholes option pricing model. Assumptions used in
          this model were as follows:

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

     i)   During the nine month period ended September 30, 2006, the Company
          decreased the exercise price of 100,000 stock options granted to a
          consultant during the year ended December 31, 2005, from $1.00 per
          share to $0.30 per share. Stock-based compensation of $879 was
          recorded as consulting expense and $1,153 as deferred compensation
          during the nine month period ended September 30, 2006. The fair value
          of the stock options was estimated by application of the fair value
          method using Black Scholes option pricing model. Assumptions used in
          this model were as follows:

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

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

          The Company has issued share purchase warrants as follows:


                                                Number of       Weighted Average
                                                 Warrants         Exercise Price

         Balance, December 31, 2004               339,000               0.56

         Issued during the period (iv)          1,080,000               0.75
         Expired during the period               (219,000)              0.75
                                                ---------               ----

         Balance, September 30, 2005            1,200,000               0.70
                                                =========               ====

         Balance, December 31, 2005             1,180,000               0.70

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

         Balance, September 30, 2006              100,000               0.13
                                                =========               ====

          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
               nine 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.

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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

7.   SUPPLEMENTARY NON-CASH INFORMATION

          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. These warrants were not exercised,
               and expired in full during fiscal the period ended September 30,
               2006.

     The Company entered into the following non-cash transactions:

     a.   On September 27, 2006, the Company issued 200,000 common shares with a
          fair value of $0.04 per share for lease payments.

     b.   On September 27, 2006, the Company issued 400,000 common shares with a
          fair value of $0.04 per share for auto expenses, of which $12,019 is
          included in prepaid expenses.

     c.   On September 27, 2006, the Company issued 125,000 common shares with a
          fair value of $0.045 per share for $5,625 of consulting services of
          which $5,538 is included in deferred compensation.

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

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

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

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

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

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

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

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

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

     m.   On February 21, 2006, the Company issued 375,000 shares with a fair
          value of $0.10 per share for $36,000 of consulting services. At
          September 30, 2006, $24,872 is included in deferred compensation.

     n.   On February 21, 2006, the Company issued 187,500 shares with a fair
          value of $0.10 per share for $18,000 of filing services. At September
          30, 2006, $7,685 is included in deferred compensation.

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


                                       19
<PAGE>
                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


7.   SUPPLEMENTARY NON-CASH INFORMATION- CONT'D


     p.   On February 14, 2006, the Company issued 125,000 common shares with a
          fair value of $0.09 per share for $11,000 of legal services.

     q.   On February 1, 2006, the Company issued 112,500 common shares with a
          fair value of $0.20 per share for $22,500 of consulting services.

     r.   On January 28, 2006, the Company issued 250,000 common shares with a
          fair value of $0.15 per share for $38,000 of consulting services of
          which $26,247 is included as a deferred compensation at September 30,
          2006.

     s.   On January 22, 2006, the Company issued 312,500 common shares with a
          fair value of $0.10 per share for $30,000 of consulting services. At
          September 30, 2006, $21,777 is included in deferred compensation.

     t.   On January 22, 2006, the Company issued 168,388 common shares with a
          fair value of $0.10 per share for settlement of $16,165 for $13,039 of
          auto expenses, of which $4,571 is included as a deferred compensation
          at September 30, 2006.

     u.   On January 18, 2006, the Company issued 375,000 common shares with a
          fair value of $0.09 per share for $33,000 of management consulting
          services.

     v.   On January 17, 2006, the Company issued 312,500 common shares with a
          fair value of $0.10 per share for $30,000 of consulting services. At
          September 30, 2006, $20,298 is included in deferred compensation.

     w.   During the quarter ended September 30, 2005, the Company issued
          5,625,000 common shares with a fair value of $0.24 per share as
          partial consideration for the purchase of licensing rights. (See Note
          3 (c)).

     x.   During the period ended September 30, 2005, the Company issued 534,875
          common shares with fair values ranging from $0.20 to $0.24 for a total
          value of $125,725 of which $50,725 was recorded as consulting expenses
          and $75,000 was recorded as professional fees.

     y.   During 2004, the Company issued 1,250,000 common shares with a fair
          value of $0.20 per share pursuant to a two-year services agreement. In
          2004, $46,875 was recorded as consulting fees and $203,125 was
          recorded as prepaid expenses. 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 subject to immediate vesting. These
          options were granted in respect of a contract that required services
          to be performed over a two year term. The intrinsic 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 as a
          prepaid expense.

          During the period ended September 30, 2005, this services agreement
          was cancelled. Subsequent to the quarter end, the Company and the
          consultant agreed that 875,000 out of the 1,250,000 common shares
          issued in 2004 were to be returned to the Company for cancellation.
          Accordingly, during the current quarter, $28,125 was recorded as
          consulting fees and $175,000 was recorded as shares to be returned for
          cancellation. Both parties also agreed to cancel 1,000,000 stock
          options granted in 2004. During the nine month period ended September
          30, 2006, $140,625 was recorded as consulting expense.

8.   RELATED PARTY TRANSACTIONS

     The Company has entered into the following related party transactions:

     a)   Recorded management and consulting fees to directors and shareholders
          totalling $730,046 (September 30, 2005 - $202,800);

     b)   Accrued interest expense to directors and shareholders totalling
          $58,492 (September 30, 2005 - $12,375);


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


9.   COMMITMENTS

     a)   On September 19, 2006, the Company entered into a consulting agreement
          with the President of the Company who will provide consulting services
          for two years in consideration for 250,000 shares of the Company's
          common stock (issued) and warrants to purchase 4,000,000 shares of the
          Company's stock at $0.20 for one year (issued subsequently).

     b)   On September 19, 2006, the Company entered into a consulting agreement
          with a company related by a common president and an independent
          company (the "Consultants") for the provision of consulting services
          in exchange for 250,000 common shares of the Company and a cash
          finders' fee of 10% of any corporate financing raised by the
          Consultants, and two year warrants to purchase common stock equal to
          10% of the number of securities sold by the Consultants.

     c)   On June 22, 2006, the Company entered into a letter of intent with
          Henan Furen Pharmaceuticals Group Co., Ltd. ("Furen"), China, for the
          proposed acquisition by the Company of 51% or more of Furen's
          subsidiary Henan Furen Huaiqingtang Pharmaceuticals Co. Ltd.
          ("Huiaqingtang ") Pursuant to the Letter of Intent, the Company has
          first refusal rights and legal exclusive rights to acquire 51% or more
          of Furen for a period of nine months from the date of letter. On
          August 7, 2006, the Company entered into a definitive acquisition
          agreement with Furen and Huiaqingtang to acquire 60% of the
          outstanding stock of Huiaqingtang at an aggregate purchase price of
          $95,000,000 RMB, a portion of which shall be paid by the Company on or
          before the closing of the agreement and a portion to be paid three
          months after closing.

     d)   On June 16, 2006, the Company entered into an engagement agreement
          with a placement agent who will market the Company's proposed
          debt/equity offering (the "Offering") in consideration for 250,000
          common shares (issued) and a cash fee equal to 10% of the gross
          proceeds of the Offering and warrants to purchase 10% of the total
          number of shares, or underlying shares to be purchased by the investor
          exercisable at a price equal to the purchase price or conversion price
          paid by the investor. The term of the agreement is one year.

     e)   On May 27, 2006, the Company entered into a consulting agreement with
          consulting firm that will provide marketing, investor relations and
          public relations services for one year in consideration for 1,500,000
          shares of the Company's common stock. At September 30, 2006, the
          Company had issued 500,000 shares of common stock. Subsequent to the
          period the Company cancelled the consulting agreement and will not
          issue any more shares.

     f)   On May 2, 2006, the Company entered into a letter of intent, with
          Shannxi Meichen Pharmaceuticals Co. Ltd. ("Shannxi"), China, for the
          proposed acquisition by the Company of 51% or more of Shannxi.
          Pursuant to the Letter of Intent, the Company has first refusal rights
          and legal exclusive rights to acquire 51% or more of Shannxi for 9
          months from the date of letter. In September 2006 the Company executed
          a definitive acquisition agreement with Shaanxi to acquire 100% of the
          issued and outstanding stock of Shaanxi for an aggregate purchase
          price of $24,800,000 RMB. The purchase price is payable as follows: i)
          80% of the purchase price is payable in shares of common stock of the
          Company, based on the average closing price of the Company's common
          stock, as reported on the OTCBB for the five day period prior to the
          closing date of the acquisition and ii) 20% of the purchase price
          payable in cash withing 30 days of closing the transaction.

     g)   On April 16, 2006, the Company entered into a letter of intent, with
          Henan Tiankang Pharmaceuticals Co. ltd. ("Henan"), located in Henan,
          China, for the proposed acquisition by the Company of 51% or more of
          Henan. Pursuant to the Letter of Intent, the Company has first refusal
          rights and legal exclusive rights to acquire 51% of Henan for a period
          of nine months from the date of letter.

     h)   On February 19, 2006, the Company entered into a letter of intent
          effective February 28, 2006, with Shaanxi WanAn Pharmaceutical Co.
          Ltd. For the proposed acquisition by the Company of 51% or more of
          Shaanxi WanAn Pharmaceutical Co. Ltd. Pursuant to the letter of intent
          the Company has first refusal rights and legal exclusive rights for
          further acquisition of 51% of Shaanxi WanAn for the next 12 months.

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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


9.   COMMITMENTS

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

     j)   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.

     k)   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 $20,000 to the Company's CEO
               starting on January 1, 2006 and pay a 3% royalty on gross sales
               of the Company.
          -    pay a monthly consulting fee of $7,000 to a shareholder and
               officer of the Company.
          -    pay a monthly consulting fee of $5,000 to a shareholder and
               officer of the Company.

10.  SUBSEQUENT EVENTS

     a)   Subsequent to September 30, 2006, the Company issued 3,250,000 shares
          of common stock in consideration for consulting services.

     b)   Subsequent to September 30, 2006, the Company granted warrants to
          acquire 7,650,000 shares of common stock in consideration for
          consulting and management services.

     c)   Subsequent to September 30, 2006, the Company issued 10,000,000 shares
          and granted warrants to acquire 10,000,000 shares of common stock
          exercisable at $0.10 per share for five years and warrants to acquire
          10,000,000 shares of common stock exercisable at $0.20 for ten years
          to settle $300,000 of debt.

     d)   On October 11, 2006, the Company entered into a letter of intent, with
          BeiJing Boran Pharmaceutical Co., Ltd. ("BeiJing Boran"), for the
          proposed acquisition by the Company of 51% or more of Beijing Boran.
          Pursuant to the Letter of Intent, the Company has first refusal rights
          and legal exclusive rights to acquire 51% or more of BeiJing Boran for
          a period of nine months from the date of letter.

     e)   On October 19, 2006, the Company entered into a letter of engagement
          and work authorization with an investor relations firm who will
          provide investor relations services for a term of one to three years
          in exchange for $10,000 a month for three month and $15,000 a month
          after that, 3,000,000 common shares and 4,000,000 warrants exercisable
          for 3 years at prices ranging from $0.25 per share to $3.50 per share.


                                       22
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

     This quarterly 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 following discussion, including
under the heading "- Risk Factors". 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 quarterly 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.

Overview

     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.

     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.

     The Company believes that its time-tested natural remedies, natural herbal
medications and dietary food supplements are particularly helpful in improving
and strengthening the immune system and cardio-cerebral vascular function as
well as improving and promoting overall physical and mental health and will
serve as a timely and effective alternative for a world that is dependent on
chemical solutions. Management believes that the Company's strength will lie in
its development, manufacturing and global commercialization of its products.


                                      23
<PAGE>
     The Company's immediate goal is the profitable penetration of the growing
global pharmaceutical industry and market and to further seek and develop
potential acquisition candidates with major pharmaceutical companies in PR China
and worldwide to secure a strong future and powerful position in the global and
PR China pharmaceutical industry. Long-term plans include the development of a
pharmaceutical drug pipeline and technology based on the Company's access to the
knowledge of traditional Chinese medicine and PR China's pharmaceutical
industry.

PRODUCTS

     We have purchased the exclusive rights to 134 proprietary natural herbal
medicinal products. 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.

     We plan to distribute, market and sell these proprietary neutraceutical
products by development of the "China Health" brand Worldwide and through retail
and franchise stores in the next 6 to 24 months. 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 will be manufactured
in accordance with Good Manufacturing Practices rules and standards.

     The company has extensive knowledge and acquired expertise in the
5000-year-old field. The source of our medicinal philosophy and the inspiration
for all of the company's proprietary products, are the traditional Taoist
philosophy and medical research related to the "King of Herbs" and other
efficacious herbal plants and minerals which offer a complete spectrum of
remedial and health enhancing properties.

     Our product lines include:

          1.   King of Herbs-based products;

          2.   Taoist Medicinal products; and

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

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

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


                                       24
<PAGE>
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. We have a total of 16 products
in our King of Herbs product line. The core products of this product line are as
follows:

     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.

     Our King of Herbs product line combines King of Herbs with other
traditional herbs to produce the desired effect on the body. These herbs are
mainly 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 below herbs 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.


                                       25
<PAGE>
TAOIST MEDICINAL PRODUCT LINE

     Taoism is an ancient worldview that acknowledges the movement towards
balance inherent in all things. The products in our Taoist Medicine product line
are considered to be dietary supplements and are not subject to stringent
clinical tests to which pharmaceutical products are subjected. This line of
products is based on the principles of Traditional Chinese Medicine and Taoism
Medicine. Taoism is an ancient worldview that acknowledges the movement towards
balance (or "Tao") inherent in all things. These products will be manufactured
in accordance with the Good Manufacturing Practices rules and standards and
regulations of Canada and the Food and Drug Administration of the United States.
The Company intends to manufacture, market and distribute its Taoist Medicine
product line in the next twelve months. We have a total of 118 products in our
Taoist Medicinal product line. The core products of our this product line are as
follows:

     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.

We currently have 118 100% natural Taoist Herbal Medicinal products.

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.

RECENT DEVELOPMENTS

Acquisition Agreement with Shaanxi MeiChen Pharmaceuticals  Co. Ltd

     On September 3 and September 7, 2006, the Company executed a Definitive
Acquisition Agreement with Shaanxi Meichen Pharmaceuticals Co. Ltd ("SMCP"), Ms.
Chen Meiying, President/CEO, and the shareholders of SMCP (the "SMCP
Shareholders"). Pursuant to the Agreement, the Company has agreed to acquire and
the SMCP Shareholders have agreed to sell, 100% of the issued and outstanding
stock of SMCP at an aggregate purchase price of $24,800,000 (RMB). The purchase
price is payable as follows: (i) 80% of the purchase price payable in shares of
common stock of the Company, based on the average closing price of the Company's
common stock, as reported on the OTCBB for the five (5) day period prior to the
closing date of the acquisition transaction; and (ii) 20% of the purchase price
payable in cash within 30 days after the closing of the transaction.

     The parties have agreed to use their best efforts to complete the
transactions contemplated by the Agreement within 30 business days from the
execution of the Agreement. Prior to closing, however, all closing conditions,
including, but not limited to, the completion of satisfactory legal and
financial due diligence, as well as the delivery of stock certificates to the
Company evidencing the ownership of the Sellers of the shares of SMCP must be
satisfied. No material relationship exists between the Sellers and the Company
and/or its affiliates, directors, officers or any associate of an officer or
director.

                                       26
<PAGE>
     SMCP is a China FDA certified GMP standards pharmaceutical drug
manufacturer based in Shaanxi, PR China. SMCP which has a total list of 27
China-FDA certified pharmaceutical drugs that are distributed to China-FDA
Licensed Hospitals and drug stores across the Shaanxi province and across PR
China.

Acquisition Agreement with Henan Furen Huaiqingtang Pharmaceuticals  Co. Ltd


     On August 7, 2006 the Company entered into an Definitive Acquisition
Agreement with Henan Furen Huaiqingtang Pharmaceuticals Co. Ltd. ("Henan Furen
Co.") and Henan Furen Pharmaceutical Group Co. Ltd. and the shareholders of
Henan Furen Co. (the "Sellers). Pursuant to the Agreement, the Company has
agreed to acquire and the Sellers have agreed to sell, 60% of the outstanding
stock of Henan Furen Co. at an aggregate purchase price of $95,000,000 (RMB) a
portion of which shall be paid by the Company on or before the closing of the
Agreement and a portion to be paid three months after the Closing, upon the
satisfaction of certain conditions.

     The parties have agreed to use their best efforts to complete the
transactions contemplated by the Agreement within 60 business days from the
execution of the Agreement. Prior to closing, however, all closing conditions,
including, but not limited to, the completion of satisfactory legal and
financial due diligence, as well as the delivery of stock certificates to the
Company evidencing the ownership of the Sellers of the shares of Henan Furen Co.
must be satisfied. The parties have further agreed to take all actions necessary
to amend the Agreement to reflect their final agreement of the material terms.
No material relationship exists between the Sellers and the Company and/or its
affiliates, directors, officers or any associate of an officer or director.

     Henan Furen Co. is a China FDA certified GMP standards pharmaceutical drug
manufacturer based in Zhengzhou PR China. Henan Furen Co. which has a total list
of forty-six China-FDA certified pharmaceutical drugs that are distributed to
China-FDA Licensed Hospitals and drugs stores across Henan province and across
PR China.

Letter Intent with Beijing Boran Pharmaceutical Co. Ltd.

     On October 11, 2006, the Companyexecuted a Letter of Intent with BeiJing
Boran Pharmaceutical Co., Ld. ("BeiJing Boran") for the proposed acquisition by
the Company of 51% or more of BeiJing Boran. Pursuant to the letter of intent,
both parties have expressed their intent and support for the cooperation and
accomplishment of the acquisition of BeiJing Boran, by the Company. Further,
BeiJing Boran has agreed to offer the Company first refusal rights and legal
exclusive rights for the acquisition of 51% or more of BeiJing Boran within nine
months from the date of the Letter of Intent. BeiJing Boran has agreed to
provide the Company with all necessary documentation and audited financial
statements for the Company within 60days, to enable the Company to commence its
due diligence. 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.

     Beijing Boran is a China - SFDA licensed GMP pharmaceutical drug
(herbal-based) corporation, as well as a pharmaceutical manufacturer, researcher
and developer, headquartered in Beijing PR China. Beijing Boran has about 30
pharmaceutical drug (herbal-based) licensed by the China-SFDA.

                                       27
<PAGE>
Letter of Intent with WangJing Hospital and WangJing Hospital of China Academy
of Chinese Medical Sciences

     On January 16, 2006, the Company 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, 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"). 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 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 Company
believes that the Project will allow it to bring the Traditional Chinese Medical
technologies and methods utilized by WangJing Hospital of China Academy of
Chinese Medical Sciences to other universities and hospitals on a worldwide
basis.

Letter of Intent with Shaanxi WanAn Pharmaceutical Co. Ltd.

     On February 19, 2006, the Company entered into a Letter of Intent,
effective as of February 28, 2006, with Shaanxi WanAn Pharmaceutical Co. Ltd.
for the proposed acquisition by the Company 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 the Company with first refusal
rights and legal exclusive rights for further acquisition of 51% or more Shaanxi
WanAn Pharmaceutical Co. Ltd. in the next 12 months.

Letter of Intent  with Henan  Tiankang  Pharmaceuticals  Co. Ltd.

     On April 16, 2006, the Company entered into a Letter of Intent with Henan
Tiankang Pharmaceuticals Co. Ltd. for the proposed acquisition by the Company of
51% or more of Henan Tiankang Pharmaceuticals Co. Ltd. Pursuant to the letter of
intent, both parties have expressed their intent and support for the cooperation
and accomplishment of the acquisition and merge of Henan Tiankang
Pharmaceuticals Ltd. by the Company. Further, Henan Tiankang Pharmaceuticals Co.
Ltd. has agreed to offer the Company with first refusal rights and legal
exclusive rights for further acquisition of 51% or more of Henan Tiankang
Pharmaceuticals Co. Ltd. in the next 9 months from the date of the signed Letter
of Intent.

     Henan Tiankang Pharmaceuticals Co. Ltd., which was established under the
laws of the Peoples Republic of China and is based in Henan, China, is a
pharmaceutical manufacturer and research and development company that has been
GMP certified (in 2004) by the Peoples Republic of China State Drug
Administrative Department. Henan Tiankang Pharmaceuticals Co. Ltd. was
established in 2002 following the restructuring of Henan XinYuan
Pharmaceuticals, which had 40 years of operating history and accomplishments in
the Peoples Republic of China. Henan Tiankang Pharmaceuticals Co. Ltd. also
acquired Henen XinLuei Pharmaceuticals (formerly known as Henan Guishanshencao
Pharmaceuticals) in 2005.

                                       28
<PAGE>
RESULTS OF OPERATIONS

Nine Months ended September 30, 2006compared to nine months ended September 30,
2005

     We had a net loss of $1,647,489 for the nine months ended September 30,
2006 as compared to a net loss of $3,137,133 for the nine months ended September
30 2005. The net loss for the nine months ended September 30, 2006 consisted
primarily of $536,062 of consulting fees, $730,046 of management fees, $151,560
of professional fees, $61,220 of interest and bank charges, $20,373 in rent,
$3,933 of travel expenses, $37,987 of office expenses, $77,147 of investor
relations related travel costs, $3,519 in depreciation expenses, $3,298 of
advertising and promotional expenses, and $13,132 of vehicle expenses. The
decrease in net loss for the nine months ended September 30, 2006 was the result
of the recognition of an impairment of licensing rights of $1,359,999 in 2005
compared to $Nil in 2006.

     Other Income (Expenses) was $9,212 for the nine months ended September 30,
2006 as compared to $1,373,750 for the nine months ended September 30, 2005. The
decrease is attributed primarily to an impairment of licensing rights of
$1,359,999 recognized during the nine months ended September 30, 2005 compared
to nil for the nine months ended September 30, 2006.

Three Months ended September 30, 2006 compared to the three months ended
September 2005

     We had a net loss of $431,812 for the three months ended September 30, 2006
as compared to a net loss of $1,050,313 for the three months ended September 30
2005. The decrease in the net loss was a result of a decrease in our expenses as
compared to the same period in 2005. For the three months ended September 30,
2006, we incurred an aggregate of $423,739 in expenses as compared to $1,053,038
for the three months ended September 30, 2005. Expenses incurred during the
three months ended September 30, 2006 consisted of $142,748 in consulting fees,
$206,213 in management fees, $21,145 in professional fees, $23,427 in interest
and bank charges, $4,971 in rent, $21 in travel expenses, $13,902 in office
expenses, $5,142 in investor relations costs, $1,129 in depreciation expenses,
$18 in advertising and promotional expenses, and $5,023 of vehicle expenses.

     Other Income (Expenses) was $8,073 for the three months ended September 30,
2006 as compared to $2,725 for the three months ended September 30, 2005. The
increase is attributed primarily to loss on settlement of debts and issuance of
shares $7,881 recognized in the three months ended September 30, 2006 as
compared to nil for the three months ended September 30, 2005.

LIQUIDITY AND CAPITAL RESOURCES

     As of September 30, 2006, we had cash of $13,520. Our current liabilities
as of September 30, 2006 aggregated $1,184,792. As of September 30, 2006, we had
a working capital deficiency of $1,152,174 and an accumulated deficit of
$7,643,790. In order to sustain our current level of operations, we will need to
raise at least $1 million 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 and pursue our acquisition strategy, we will need to raise at
least $25 million over the next twelve to twenty-four 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.

                                       29
<PAGE>
     As of September 30, 2006, we had outstanding loans to our CEO Julianna Lu
in the amount of $890,266 and Vice President XiaoFei Yu in the amount of
$174,706. 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

     The Company has an extensive knowledge of and expertise in the field of
Traditional Chinese Medicine, which it intends to use to develop, manufacture,
and commercialize natural herbal medicinal products and a comprehensive line of
natural multi-vitamins and mineral food supplements. The Company's medicinal
philosophy includes elements of traditional Taoist teachings and medical
research related to the "King of Herbs" and significant herbal plants and
minerals.

     The Company's immediate goal is to accomplish the profitable penetration of
the growing global market for natural herbal medicinal remedies and health
enhancement products and to seek and develop potential merger and acquisition
candidates with major pharmaceutical companies in PR China and worldwide to
secure a strong future and powerful position in the global and PR China
pharmaceutical industry. Long-term plans include the development of a
pharmaceutical drug pipeline and technology based on the Company's access to the
knowledge of Traditional Chinese Medicine and PR China pharmaceutical industry.

     The Company will be supported by two core, wholly owned subsidiaries: 1.
China Health World Pharmaceutical Corporation, which will develop, manufacture
and commercialize natural medications for epidemic diseases and conditions
related to mellitus, cardiovascular and cerebral-vascular system dysfunctions,
and neurological disorders. 2. China Health World Trade Corporation, which will
support the Company in the areas of worldwide branding, multimedia marketing and
multi-channel distribution to global customers and markets.

     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.

     In the next 12 to 24 months, we are planning to launch the VG-King and
VG-Queen to be sold in North America. VG-King and VG-Queen are part of King of
Herbs product line. VG-King is formulated specifically for the male
genitor-urinary system. VG Queen is formulated specifically for the female
reproductive system.

     In the next 12 to 24 months, 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.

                                       30
<PAGE>
     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 12 to 24 months.

     We are in the process of identifying and developing more and promising
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. The Company believes that
further acquisitions will enable it to vertically integrate its planned
operations from manufacturing, developing and marketing Chinese herbal based
medicinal products, as well as establishing a pharmaceutical drug pipeline, to
full distribution and marketing across PR China, therefore substantially
increasing profit margins. Acquisitions should accelerate growth of revenues and
earnings. A strategic combination of assets, net income, an enhanced
pharmaceutical drug pipeline and technologies will accrete value to the Company
and its shareholders

     If we are successful in raising $25 million in equity financing to expand
our business and fund future development, we anticipate that we will utilize the
proceeds as follows 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) $1,800,000 for general working
capital, including product development, inventory, and general and
administrative expenses; (f)$ 20 million to complete our planned strategic
acquisitions. We do not expect to purchase or sell significant equipment or to
significantly increase the number of our employees over the next twelve months.


                                       31
<PAGE>
     If we are only successful in raising $5 million of financing to sustain our
current level of business operations, we anticipate that we will utilize the
proceeds as follows 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, and (f) the balance for
completion of certain of the Company's proposed acquisition projects.

     There can be no assurance that we will be successful in obtaining
additional financing in sufficient amounts or on acceptable terms.

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.

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.

                                       32
<PAGE>
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
September 30, 2006 we had a working capital deficiency of $1,152,174 (current
assets less current liabilities) and an accumulated deficit of $7,643,790. With
our current resources we expect to be able to satisfy our cash requirements
through September 30, 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 $25 million in financing over the next twelve to
twenty-four 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, 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, and at least
$20 million to complete our planned strategic acquisitions. 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.

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.

                                       33
<PAGE>
     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.

                                       34
<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. Although we have signed a Letters of Intent to
acquire WangJing Hospital and WangJing Hospital of China Academy of Chinese
Medical Sciences, Shaanxi WanAn Pharmaceutical Co. Ltd. and Henan Tiankang
Pharmaceuticals Ltd., there can be no assurance that any or all of such
acquisitions will be completed. Even if the acquisitions are completed, the
final terms of the acquisition agreements may vary substantially from the terms
described in this Offering Memorandum.

     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.

                                       35
<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 directors and advisors, including Ms. Julianna Lu and Dr.
Li, Dahong and Mr. Xiao Fei Yu and Mr. Simpson, James H., 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.


                                       36
<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.

                                       37
<PAGE>
     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.

     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.


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     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.

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.

The Exercise Of Our Outstanding Warrants And Options May Depress Our Stock Price

     Not including the Warrants to be issued in connection with this offering,
we currently have 15,409,175 warrants and options to purchase shares of our
common stock outstanding. The exercise of warrants and/or options by a
substantial number of holders within a relatively short period of time could
have the effect of depressing the market price of our common stock and could
impair our ability to raise capital through the sale of additional equity
securities.

The Issuance Of Additional Shares Of Common Stock In Connection With Our
Proposed Acquisition Will Dilute Your Investment In Our Common Stock.

     In connection with our proposed acquisitions, we may issue a substantial
amount of shares of Common Stock, Preferred Stock and/or warrants to purchase
additional shares of Common Stock or Preferred Stock. The issuance of these
shares will have a significant further diluting effect on the proportionate
equity interest and voting power of current holders of our Common Stock,
including investors in this Offering.

ITEM 3. CONTROLS AND PROCEDURES.

     a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. As of the end of the
period covered by this report, we conducted an evaluation, under the supervision
and with the participation of our chief executive officer and chief financial
officer of our disclosure controls and procedures (as defined in Rule 13a-15(e)
and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures are effective to ensure that the information required to
be disclosed by us in the reports that we file or submit under the Exchange Act
is (i) recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, and (ii)
is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, to allow timely decisions regarding
required disclosure.

     b) CHANGES IN INTERNAL CONTROLS. There was no change in our internal
controls or in other factors that could affect these controls during our last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

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                                     PART II

ITEM 1. LEGAL PROCEEDINGS.

We are currently not aware of any legal proceedings or claims that we believe
will have, individually or in the aggregate, a material adverse affect on our
business, financial condition or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On September 27, 2006, the Company issued 200,000 common shares with a fair
value of $0.04 per share for lease payments.

On September 27, 2006, the Company issued 400,000 common shares with a fair
value of $0.04 per share for auto expenses, of which $12,019 is included in
prepaid expenses.

On September 27, 2006, the Company issued 125,000 common shares with a fair
value of $0.045 per share for $5,625 of consulting services of which $5,538 is
included in deferred compensation.

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

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

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

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 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

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


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                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


Dated:  November 14, 2006
                                       China Health Holdings, Inc.


                                       By:/s/ Julianna Lu
                                       ---------------
                                       Julianna Lu
                                       Chief Executive Officer, Principal
                                       Financial Officer, Principal Accounting
                                       Officer, Treasurer and
                                       Chairman of the Board of Directors





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