**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, 2007**






[  ] **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
      HOLDINGS, INC.**


**(f/k/a
      CHINA HEALTH HOLDING, INC.)**


(Name
      of
      small business issuer in its charter)




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




**Julianna
      Lu, BSc. MSc.**


**Chief
      Executive Officer**


**101Convention Center Drive, Suite 700, Las Vegas, NV
      89107-2001**


(Address
      of principal executive offices) (Zip Code)





Issuer’s
      telephone Number: **(877) 883-0979**





**Mailing
      Address**


**8E-C2,
      Global Trade Mansion, No.9A, GuangHua Rod, Chaovan District, Beijing PR China
      100020**





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





Copies
      to:


Richard
      A. Friedman, Esq.


Sichenzia
      Ross Friedman Ference LLP


61
      Broadway, 32nd
      Floor


New
      York,
      New York 10006


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, 2007 were $0.




As
      of
      November 16,, 2007 there were 166,522,060 shares of issuer's common stock issued
      and outstanding and 1,250,000 Series A Preferred Shares issued and
      outstanding.




1




**CHINA
      HOLDINGS, INC.**


**FORM
      10-QSB**




**For
      the Fiscal Quarter Ended September 30, 2007**










Part
                I
            PageItem
                1.  Financial Statements.
            4Item
                2.  Management's Discussion and Analysis or Plan of
                Operations.
            25Item
                3.  Controls and Procedures
            34Part
                ll
            PageItem
              1.  Legal Proceedings.
            35Item
                2.  Unregistered Sale of Equity Securities and Use of
                Proceeds
            35Item
                3.  Defaults Upon Senior Securities
            35Item
                4.  Submission of Matters to a Vote of Security
                Holders.
            35Item
                5.  Other Information
            35Item
                6. Exhibits.
            35Signatures.
            36




2




**ITEM
      1. FINANCIAL STATEMENTS**





**CHINA
          HOLDINGS, INC.**
 **(a
          development stage company)**
 CONDENSED
          CONSOLIDATED FINANCIAL STATEMENTS
 September
          30, 2007
 (Unaudited)
 
 
  **UNAUDITED
                    CONDENSED CONSOLIDATED BALANCE SHEETS**
                F-2**UNAUDITED
                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**
                F-3**UNAUDITED
                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**
                F-4**NOTES
                    TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
                    STATEMENTS**
                F-5
 
 F-1
 **CHINA  HOLDING
          INC.**
 **(a
          development stage company)**
 CONDENSED
          CONSOLIDATED BALANCE SHEET
  September
                    30,
                
                
                December
                    31,2007
                
                
                2006(Unaudited)ASSETSCURRENT
                    ASSETSCash
                
                $
                4,837
                
                
                $
                -Prepaid
                    expenses and other current assets
                
                
                7,350
                
                
                
                97,759Total
                    current assets
                
                
                12,188
                
                
                
                97,759PROPERTY
                    AND EQUIPMENT, net (Note 4)
                
                
                616,201
                
                
                
                10,369Intangible
                    Assets (Note 3)
                
                
                3
                
                
                
                3TOTAL
                    ASSETS
                
                $
                628,392
                
                
                $
                108,131LIABILITIES
                    AND STOCKHOLDERS’ (DEFICIT)CURRENT
                    LIABILITIESAccounts
                    payable and accrued liabilities
                
                $
                34,069
                
                
                $
                35,007Due
                    to shareholders (Note 5)
                
                
                1,161,222
                
                
                
                875,822Total
                    current liabilities
                
                
                1,195,291
                
                
                
                910,829COMMITMENTS
                    (Notes 3 and 9)STOCKHOLDERS'
                    (DEFICIT)Preferred
                    stock, $0.001 par value, 20,000,000 shares authorized,1,250,000  (December
                    31, 2006 – 1,250,000) shares issued and outstanding (Note
                    6)
                
                
                1,250
                
                
                
                1,250Common
                    stock, $0.001 par value, 300,000,000 shares authorized161,857,060
                    (December 31, 2006-106,747,060) shares issued and outstanding
                    (Note
                    6)
                
                
                161,858
                
                
                
                106,747Additional
                    paid-in capital
                
                
                13,154,704
                
                
                
                8,496,543Deferred
                    compensation (Note 6 and 7)
                
                
                (70,781
                )
                
                
                (153,942
                )Deficit
                    accumulated during the development stage
                
                
                (13,750,749
                )
                
                
                (9,193,377
                )Accumulated
                    other comprehensive loss
                
                
                (63,181
                )
                
                
                (59,919
                )Total
                    Stockholders’ Deficit
                
                
                (566,899
                )
                
                
                (802,698
                )TOTAL
                    LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
                
                $
                628,392
                
                
                $
                108,131
   See
        Notes
        to Unaudited Condensed Consolidated Financial Statements
    F-2
   **CHINA  HOLDING
          INC.**
 **(a
          development stage company)**
 CONDENSED
            CONSOLIDATED STATEMENTOF OPERATIONS
 (Unaudited)
 For
                      the
                
                
                For
                      the
                
                
                For
                      the
                
                
                For
                      the
                
                
                Culmulative
                    results ofThree
                      Month
                
                
                Three
                      Month
                
                
                Nine Month
                
                
                Nine Month
                
                
                operations
                    fromEndedSeptember
                    30
                
                
                EndedSeptember
                    30
                
                
                EndedSeptember
                    30
                
                
                EndedSeptember
                    30
                
                
                April
                    3, 2002 (Inception)2007
                
                
                2006
                
                
                2007
                
                
                2006
                
                
                to
                    September 30, 2007SALES
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                8,976Cost
                    of goods sold
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                245-
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                8,731EXPENSESAdvertising
                    and promotion
                
                
                13,190
                
                
                
                18
                
                
                
                31,830
                
                
                
                3,298
                
                
                
                153,722Amortization
                    of intangible assets
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                7,125Consulting
                    fees (Notes 6 and 7)
                
                
                283,503
                
                
                
                142,748
                
                
                
                1,369,179
                
                
                
                536,062
                
                
                
                4,311,005Depreciation
                
                
                1,739
                
                
                
                1,129
                
                
                
                3,986
                
                
                
                3,519
                
                
                
                13,154Interest
                    and bank charges (Note 8)
                
                
                26,442
                
                
                
                23,427
                
                
                
                374,702
                
                
                
                61,220
                
                
                
                562,296Investor
                    relations
                
                
                31,426
                
                
                
                5,142
                
                
                
                (164,977
                )
                
                
                77,147
                
                
                
                (33,498
                )Management
                    fees (Note 7)
                
                
                267,735
                
                
                
                206,213
                
                
                
                567,120
                
                
                
                730,046
                
                
                
                2,772,464Office
                
                
                2,845
                
                
                
                13,902
                
                
                
                13,290
                
                
                
                37,987
                
                
                
                97,902Professional
                    fees (Note 7)
                
                
                35,592
                
                
                
                21,145
                
                
                
                120,316
                
                
                
                151,560
                
                
                
                921,551Compensatory
                    element of Stock
                
                
                245,360
                
                
                
                -
                
                
                
                2,223,616
                
                
                
                -
                
                
                
                2,986,481Rent
                
                
                6,051
                
                
                
                4,971
                
                
                
                24,092
                
                
                
                20,373
                
                
                
                98,988Research
                    and development (Note 3)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,743,593Travel
                
                
                2,667
                
                
                
                21
                
                
                
                11,518
                
                
                
                3,933
                
                
                
                50,342Impairment
                    of licensing rights (Note 3)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                182,874Vehicle
                
                
                -
                
                
                
                5,023
                
                
                
                5,257
                
                
                
                13,132
                
                
                
                31,048TOTAL
                    EXPENSES
                
                
                916,550
                
                
                
                423,739
                
                
                
                4,579,927
                
                
                
                1,638,277
                
                
                
                13,899,045NET
                    LOSS FROM OPERATIONS
                
                
                (916,550
                )
                
                
                (423,739
                )
                
                
                (4,579,927
                )
                
                
                (1,638,277
                )
                
                
                (13,890,314
                )OTHER
                    INCOME (EXPENSES)Foreign
                    exchange
                
                
                -
                
                
                
                (192
                )
                
                
                5,829
                
                
                
                (1,331
                )
                
                
                40,816Gain
                    (loss) on settlement of debts and issuance of  shares (Notes 7
                    and 11)
                
                
                -
                
                
                
                (7,881
                )
                
                
                16,728
                
                
                
                (7,881
                )
                
                
                98,751Other
                    Income (expenses)
                
                
                -
                
                
                
                (8,073
                )
                
                
                22,557
                
                
                
                (9,212
                )
                
                
                139,567NET
                    LOSS
                
                $
                (916,550
                )
                
                $
                (431,812
                )
                
                $
                (4,557,370
                )
                
                $
                (1,647,489
                )
                
                $
                (13,750,747
                )BASIC
                    NET LOSS PER SHARE
                
                
                (0.01
                )
                
                
                (0.01
                )
                
                
                (0.04
                )
                
                
                (0.03
                )WEIGHTED
                    AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
                
                
                128,799,033
                
                
                
                62,667,000
                
                
                
                128,799,033
                
                
                
                58,764,000NET
                    LOSS
                
                $
                (916,550
                )
                
                $
                (431,812
                )
                
                $
                (4,557,370
                )
                
                $
                (1,647,489
                )Comprehensive
                    translation loss
                
                
                -
                
                
                
                -
                
                
                
                (3,262
                )
                
                
                -Comprehensive
                    loss
                
                $
                (916,550
                )
                
                $
                (431,812
                )
                
                $
                (4,560,632
                )
                
                $
                (1,647,489
                )
   See
        Notes
        to Unaudited Condensed Consolidated Financial Statements
   F-3
   **CHINA  HOLDING
          INC.**
 **(a
          development stage company)** CONDENSED
            CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 For
                    the
                
                
                For
                    theNine Month
                
                
                Nine Month
                
                
                Culmulative
                    results ofEnded
                
                
                Ended
                
                
                operations
                    fromSeptember
                    30
                
                
                September
                    30
                
                
                April
                    3, 2002 (Inception)2007
                
                
                2006
                
                
                to
                    September 30, 2007OPERATING
                    ACTIVITIESNet
                    loss
                
                
                
                
                
                
                
                
                
                $
                (4,557,372
                )
                
                $
                (1,647,489
                )
                
                $
                (13,750,749
                )Adjustments
                    to reconcile net loss to cash usedin
                    operating activities:Amortization
                    of deferred financing costs
                
                
                
                
                
                
                
                
                
                
                29,482
                
                
                
                
                
                
                
                29,482Accrued
                    interest
                
                
                
                
                
                
                
                
                
                
                79,218
                
                
                
                58,491
                
                
                
                260,788Amortization
                    of intangible assets
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                7,125Compensatory
                    element of stock
                
                
                
                
                
                
                
                
                
                
                77,932
                
                
                
                -
                
                
                
                640,541Depreciation
                
                
                
                
                
                
                
                
                
                
                3,986
                
                
                
                3,519
                
                
                
                13,155Impairment
                    of licensing rights
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                182,874License
                    rights
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                1,359,999Gain
                    (Loss) on settlement of debts and
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                (107,252
                )issuance
                    of shares
                
                
                
                
                
                
                
                
                
                
                (16,728
                )
                
                
                -Non
                    cash expenses paid with shares
                
                
                
                
                
                
                
                
                
                
                1,325,580
                
                
                
                667,893
                
                
                
                4,529,170Stock-based
                    compensation
                
                
                
                
                
                
                
                
                
                
                384,763
                
                
                
                413,304
                
                
                
                2,089,417Warrant
                    issued for Compensation
                
                
                
                
                
                
                
                
                
                
                2,066,279
                
                
                
                -
                
                
                
                2,829,144Changes
                    in operating assets and liabilitiesPrepaid
                    expenses
                
                
                
                
                
                
                
                
                
                
                88,874
                
                
                
                (1,888
                )
                
                
                146,522Accounts
                    payable and accrued liabilities
                
                
                
                
                
                
                
                
                
                
                (938
                )
                
                
                15,722
                
                
                
                42,449Net
                    cash used in operating activities
                
                
                
                
                
                
                
                
                
                
                (518,924
                )
                
                
                (490,448
                )
                
                
                (1,727,335
                )INVESTING
                    ACTIVITIESPurchase
                    deposit for acquisition of companies
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                (19,536
                )Net
                    cash used in investing activities
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                (19,536
                )FINANCING
                    ACTIVITIESProceeds
                    from issuance of common stock
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                513,697Net  advances
                    (repayment) from shareholders
                
                
                
                
                
                
                
                
                
                
                527,023
                
                
                
                492,154
                
                
                
                1,305,465Net
                    cash provided by financing activities
                
                
                
                
                
                
                
                
                
                
                527,023
                
                
                
                492,154
                
                
                
                1,819,162EFFECT
                    OF EXCHANGE RATE CHANGES
                
                
                
                
                
                
                
                
                
                
                (3,262
                )
                
                
                (3,073
                )
                
                
                (67,454
                )NET
                    (DECREASE) INCREASE IN CASH
                
                
                
                
                
                
                
                
                
                
                4,837
                
                
                
                (1,367
                )
                
                
                4,837CASH,
                    BEGINNING OF YEAR
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                14,887
                
                
                
                -CASH,
                    END OF YEAR
                
                
                
                
                
                
                
                
                
                $
                4,837
                
                
                $
                13,520
                
                
                $
                4,837
  See
          Notes
          to Unaudited Condensed Consolidated Financial Statements
   F-4
  **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
 
 **1.****NA****TURE
          OF OPERATIONS AND BASIS OF
          PRESENTATION**
 
  China
            Holdings 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.
 
 On
          May 1,
          2007, China Health Holdings, Inc., a Nevada corporation, (the "Company"),
          amended its Articles of Incorporation to change its name to "China Holdings,
          Inc." The Company's new CUSIP number is 16942B 102. The change in name
          did not
          require stockholder approval, and the outstanding shares of common and
          preferred
          stock will not be affected by the change in name.
 
 Also
          on
          May 1, 2007, the Company's wholly owned subsidiary, China Health World
          Pharmaceutical Corporation, amended its Articles of Incorporation to change
          its
          name to "China Health Holdings, Inc." and on May 9, 2007, the Company’s wholly
          owned subsidiary China Health World Trade Corporation changed its name
          to China
          Power, Inc.
  UNAUDITED
          INTERIM FINANCIAL STATEMENTS
 
 The
          accompanying unaudited condensed consolidated 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 three and nine months ended September 30, 2007 are not
          necessarily indicative of the results that may be expected for the year
          ended
          December 31, 2007.
  
 **2.****SIGNIFICANT
          ACCOUNTING
          POLICIES**
 
 a)Basis
          of
          presentation
  
 F-5
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
  
 **2.****SIGNIFICANT
          ACCOUNTING
          POLICIE****S
          - CONT****’****D**
 
  These
          condensed 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
          $1,183,104 and a stockholders’ deficit of $13,750,749 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.
 
 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
          unaudited condensed 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 condensed consolidated financial statements in conformity with
          accounting principles generally accepted in the United States requires
          management to make estimates and assumptions that affect certain reported
          amounts and disclosures. Accordingly, actual results could differ from those
          estimates.
 
 F-6
 
 
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
  
 **2.****SIGNIFICANT
          ACCOUNTING POLICIES
          - CONT****’****D**
 
  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.
  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
   F-7
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
  
 **2.****SIGNIFICANT
          ACCOUNTING POLICIES
          - CONT****’****D**
 
 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 and Chinese Yuan Renminbi.
          The financial statements are translated to United States dollars in accordance
          with SFAS No. 52, “Foreign Currency Translation”, using period-end rates of
          exchange for assets and liabilities, and average rates of exchange for
          the year
          for revenues and expenses. Translation gains (losses) are recorded in
          accumulated other comprehensive income (loss) as a component of stockholders’
deficit. Gains and losses arising on translation or settlement of foreign
          currency denominated transactions or balances are included in the
          determination of income. Foreign currency transactions are primarily undertaken
          in Canadian dollars. The Company has not, to the date of these consolidated
          financials statements, entered into derivative instruments to offset the
          impact
          of foreign currency fluctuations.
  j)Income
          taxes
 
 The
          Company follows SFAS No. 109, “Accounting for Income Taxes”, using the liability
          method of accounting for income taxes. Under this method, deferred income
          tax
          assets and liabilities are recognized for the estimated tax consequences
          attributable to differences between the financial statement carrying values
          and
          their respective income tax basis (temporary differences). The effect on
          deferred income tax assets and liabilities of a change in tax rates is
          recognized in income in the period that includes the enactment date. At
          December
          31, 2006, full deferred tax asset valuation allowance has been provided
          and no
          deferred tax asset benefit has been recorded.
 
 F-8
 
 
 
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
 
 **2.****SIGNIFICANT
          ACCOUNTING POLICIES
          - CONT****’****D**
 
 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.
  l)Recent
          accounting
          pronouncements
 
 SFAS
          No.
          159. In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
          Financial Assets and Financial Liabilities.”SFAS 159 permits
          entities to choose to measure many financial instruments, and certain other
          items, at fair value.SFAS 159 applies to reporting periods
          beginning after November 15, 2007. The adoption of SFAS 159 is not expected
          to
          have a material impact on the Company's financial condition or results
          of
          operations.
   F-9
 
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
  
 **2.****SIGNIFICANT
          ACCOUNTING POLICIES
          - CONT****’****D**
 
  In
          September 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.
  
 F-10
 
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
  
 **3.****INTANGIBLE
          ASSETS**
 
  a)
  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.
  b)
 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.
   F-11
   **CHINA
              HOLDINGS INC.**
 **(a
              development stage company)**
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
              30, 2007
 (Unaudited)
   
 3.  **INTANGIBLE
              ASSETS**
 On
          March
          9, 2004, the Company entered into another licensing agreement (the “De-Daibe
          Agreement”), which grants the Company exclusive licenses to De-Daibe and
          Depressor Herbs neutraceutical products for a term of twenty years in the
          following countries: United States, Canada, Argentina, Brazil, Columbia,
          Chile,
          Uruguay, Paraguay, England, France, Germany, Italy, Spain, Holland, Poland,
          Switzerland, Sweden, Australia, Monaco, Norway, Denmark, Austria, Ireland,
          Israel, Kuwait, Iran, Hong Kong, Japan, Malaise, Singapore, India, Indonesia
          and
          the People’s Republic of China. This licensing agreement grants the Company (a)
          the exclusive license to utilize the De-Daibe and Depressor Herbs neutraceutical
          products and their raw materials in the above-listed territories; (b) the
          exclusive rights to register the Trademarks/Trade Names of the products
          under
          the Company’s name in each of the above-listed territories; (c) the exclusive
          license to use, replicate, copy, modify, adopt and manufacture the products
          for
          the purpose of developing derivative products by modifying, refining, upgrading,
          or improving the licensed property; and (d) the exclusive rights to the
          licensed products’ ingredients. In addition, Hotway granted the Company a right
          of first refusal to acquire any new products developed by Hotway after
          March 9,
          2004. In consideration for rights granted under the De-Daibe Agreement,
          the
          Company agreed to pay Hotway $10,000 for each country listed above, for
          a total
          of $330,000 originally due to Hotway by March 9, 2005.****The
          Company also agreed to: (a) sell a minimum of 2,000 bottles/60 capsules
          of the
          licensed products within 6-12 months after March 9, 2004; (b) manage marketing
          programs for the licensed products within 3-6 months after March 9, 2004;
          (c)
          maintain sales of a minimum of 6,000 bottles/60 capsules annually for each
          above-listed country within 6-12 months after March 9, 2004; and (d) sell
          a
          minimum of 200kg/month of raw materials in Canada within 6-12 months after
          March
          9, 2004.
 
    F-12
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
 
  
 **3.****INTANGIBLE
          ASSETS -
          CONT’D**
 
 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
  
 F-13
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
 
 
 **3.****INTANGIBLE
          ASSETS -
          CONT’D**
 
 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.
 
 
 **4.****PROPERTY
          AND
          EQUIPMENT**
 
 Property
          and equipment consists of the following:
  September
                    30,
                
                
                December
                    31,2007
                
                
                
                2006Computer
                
                $
                27,964
                
                
                $
                16,688Deposit
                    for Acquisition of Company
                
                
                598,000
                
                
                
                -0-Furniture
                    and Fixtures
                
                
                3,392
                
                
                
                2,849629,356
                
                
                
                19,537Less:
                    accumulated depreciation
                
                
                (13,154
                )
                
                
                (9,168
                )$
                616,202
                
                
                $
                10,369
 
 Depreciation
          expense amounted to $1,739 and $3,987 for the three and nine months ended
          September 30, 2007, respectively.
 
 The
          Deposit for acquisition was paid for
          by the Company in stock in the first quarter.
  
 **5.****DUE
          TO
          SHAREHOLDERS**
 
 The
          Company has received advances from its shareholder which bears interest
          at 10%
          per annum with no specific repayment terms. The amounts outstanding
          were.
   September
                    30, 2007
                
                
                December
                    31, 2006$
                1,161,222
                
                
                $
                875,822
  F-14
 
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
 
 **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 September 16, 2006 the Company approved an increase
          in the
          number of authorized Series A Preferred stock to 2,500,000 with the same
          par
          value.
  During
                    the period ended September 30, 2007, the Company issued a total
                    of
                    12,435,000 common shares for services at an average of $0.0298
                    per share
                    for a total consideration of
                    $356,900.
 
 During
                    the three month ended September 30, 2007 Company issued 10,880,000
                    common
                    shares for finance cost at an average of $0.023 per share for
                    a total
                    consideration of $245,360.
  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.
 
 F-15
 
 
 
 
 **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
  
 **6.**
                **CAPITAL
                    STOCK - CONT’D**
 
 
 The
          Company has granted stock options as follows:
 **Number
                    of Options**
                
                
                **Weighted
                    Average Exercise price**
                  **$**
                
                
                **Weighted
                    Average Remaining Contractual Life**Balance,
                    December 31, 2006
                
                
                12,729,175
                
                
                
                0.19
                
                
                2.22
                    yearsIssued
                    during the period
                
                
                --
                
                
                
                --
                
                
                
                -Exercised
                    during the period
                
                
                --
                
                
                
                --Cancelled
                    during the period
                
                
                --
                
                
                
                --
                
                
                
                -Expired
                    during the period
                
                
                1,577,753--
                
                
                
                --
                
                
                
                -Balance
                    September 30, 2007
                
                
                11.151.422
                
                
                
                0.20
                
                
                1.48
                    years
  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 $100,878.65 was recorded as consulting expense
          till
          September 30,2007 and $11,002.73 as unamortized balance in deferred compensation
          as of September 30,2007. The fair value of the stock options was estimated
          by
          application of the fair value method using Black Scholes option pricing
          model.
          Assumptions used in this model were as follows:
 
 Risk-free
                  interest rate
              4.26%Dividend
                  yield
              0%Volatility
                  factor
              272%Expected
                  option life
              2
                  years
 
 
 F-16
 
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
  
 **6.**
              **CAPITAL
                  STOCK - CONT’D**
 
  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 $66,501 was recorded as consulting expense
          till
          September 30,2007and $44,952 as unamortized balance in deferred compensation
          as
          of September 30, 2007. 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
 
 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 $276,191 was recorded as consulting
          till
          September 30, 2007.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 $154,525 was recorded as consulting expense
          till
          September 30,2007and $24,507 as unamortized balance in deferred compensation
          as
          of September 30, 2007. 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-17
   
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
    
 **6.**
              **CAPITAL
                  STOCK - CONT’D**
 
 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 $204,061 was recorded as consulting expense
          till
          September 30,2007and $32,571 as unamortized balance in deferred compensation
          as
          of September 30, 2007. 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 $20,742 was recorded as consulting expense till September
          30,2007 and $0 as unamortized balance in deferred compensation as of September
          30, 2007. The fair value of the stock options was estimated by application
          of
          the fair value method using Black Scholes option pricing model. Assumptions
          used
          in this model were as follows:
 
 Risk-free
                  interest rate
              4.55%Dividend
                  yield
              0%Volatility
                  factor
              266%Expected
                  option life
              1
                  year
   During
        the year ended December 31, 2006, the Company decreased the exercise price
        of
        100,000 stock options granted to a consultant during the year ended December
        31,
        2005, from $1.00 per share to $0.30 per share. Stock-based compensation of
        $2,602 was recorded as consulting expense till September 30, 2007 and $0
        as
        unamortized balance in deferred compensation as of September 30, 2007. The
        fair
        value of the stock options was estimated by application of the fair value
        method
        using Black Scholes option pricing model. Assumptions used in this model
        were as
        follows:
 
 Risk-free
                  interest rate
              4.55%Dividend
                  yield
              0%Volatility
                  factor
              266%Expected
                  option life
              1
                  year
 
 
 F-18
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
   
 **6.**
              **CAPITAL
                  STOCK - CONT’D**
 
 i) During
          the year ended December 31, 2006, the Company decreased the exercise price
          of
          100,000 stock options granted to a consultant during the year ended December
          31,
          2005, from $1.00 per share to $0.30 per share. Stock-based compensation
          of
          $1,976 was recorded as consulting expense till September 30,2007 and $0
          as
          unamortized balance in deferred compensation
          as of September 30, 2007. The fair value of the stock options was estimated
          by
          application of the fair value method using Black Scholes option pricing
          model.
          Assumptions used in this model were as follows:
 
 Risk-free
                  interest rate
              4.59%Dividend
                  yield
              0%Volatility
                  factor
              269%Expected
                  option life
              1
                  year
  On
        May 1,
        2006, the Company increased the exercise price of 250,000 stock options granted
        to a consultant from $0.30 to $0.50 per share for 125,000 stock options and
        $1.00 per share for the remaining 125,000 stock options.
   e).****During the quarter ended June 30, 2007, the Company issued 6,000,000
        warrants at $0.20 per unit. Each warrant entitles the holder to purchase
        an
        additional common share for $0.20 and must be exercised within one to three
        years of the date of issuance: The Warrants Blackscholes Values are as
        following:
 
 i.
        1,000,000 warrants issued on March 26, 2007 at 0.20 per warrants for three
        years
        term:
  Risk-free
                  interest rate
              4.85%Dividend
                  yield
              0%Volatility
                  factor
              280
                  %Expected
                  option life
              3year
  ii. .
        1,000,000 warrants issued on March 26, 2007 at 0.20 per warrants for two
        years
        term:
  Risk-free
                  interest rate
              4.85%Dividend
                  yield
              0%Volatility
                  factor
              280
                  %Expected
                  option life
              2year
   F-19
  **6.**
                **CAPITAL
                    STOCK - CONT’D**
  iii.
        1,000,000 warrants issued on March 26, 2007 at 0.20 per warrants for one
        year
        term:
  Risk-free
                  interest rate
              4.85%Dividend
                  yield
              0%Volatility
                  factor
              280
                  %Expected
                  option life
              1year
  iv.
        1,000,000 warrants issued on June 15, 2007 at 0.20 per warrants for three
        years
        term:
 
 Risk-free
                  interest rate
              4.85%Dividend
                  yield
              0%Volatility
                  factor
              280
                  %Expected
                  option life
              3year
  v.
        1,000,000 warrants issued on June 15, 2007 at 0.20 per warrants for two years
        term:
 
 Risk-free
                  interest rate
              4.85%Dividend
                  yield
              0%Volatility
                  factor
              280
                  %Expected
                  option life
              2year
  vi.
        1,000,000 warrants issued on June 15, 2007 at 0.20 per warrants for three
        years
        term:
 
 Risk-free
                  interest rate
              4.85%Dividend
                  yield
              0%Volatility
                  factor
              280
                  %Expected
                  option life
              1year
  
 **7.**
              **SUPPLEMENTARY
                  NON-CASH INFORMATION**
 
 The
        Company has issued share purchase warrants as follows:
  Warrants
                
                Average
                    Exercise
                
                
                PriceBalance,
                    December 31, 2006
                
                
                31,750,000
                
                
                $
                0.15Issued
                    during  through March 31, 2007
                
                
                25,000,000
                
                
                $
                0.17Issued
                    during the through June 30, 2007
                
                
                6,000,000
                
                
                $
                0.20Expired
                    during the period
                
                
                (2,100,000
                )
                
                $
                0.15Balance,
                    September 30, 2007
                
                
                60,650,000
                
                
                $
                0.16
  
 F-20
 
 
 
 
 
  
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
  
 **7.**
              **SUPPLEMENTARY
                  NON-CASH INFORMATION**
 
 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.
  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.
 
 v)
              During
                  2006, the Company issued 21,650,000 warrants at $0.20 per unit.
                  Each
                  warrant entitles the holder to purchase an additional common share
                  for
                  $0.20 and must be exercised within two years of the date of issuance.
                  The
                  Company issued 10,000,000 warrants at $0.10 per unit. Each warrant
                  entitles the holder to purchase an additional common share for
                  $0.10 and
                  must be exercised within two years of the date of
                  issuance.
 
 vi)
              During
                  2007, the Company issued 5,000,000 warrants at $0.20 per unit.
                  Each
                  warrant entitles the holder to purchase an additional common share
                  for
                  $0.20 and must be exercised within five years of the date of
                  issuance.
 
 vii)
              During
                  2007, the Company issued 10,000,000 warrants at $0.10 per unit.
                  Each
                  warrant entitles the holder to purchase an additional common share
                  for
                  $0.10 and must be exercised within five years of the date of
                  issuance.
 
 viii)
              During
                  2007, the Company issued 10,000,000 warrants at $0.20 per unit.
                  Each
                  warrant entitles the holder to purchase an additional common share
                  for
                  $0.20 and must be exercised within five years of the date of
                  issuance.
  F-21
 
 
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
  
 **7.**
              **SUPPLEMENTARY
                  NON-CASH INFORMATION**
 
 The
        Company entered into the following non-cash transactions:
  A1.
        On
        July 1, 2007, the Company issued 100,000 shares of common stock with a fair
        value of $.06 per share for legal services.
 
 B1.
        On
        July 1, 2007, the Company issued 5,000,000 shares of common stock with a
        fair value of $.03per share for consulting services.
 
 C1.
        On
        July 1, 2007, the Company issued 5,000,000 shares of common stock with a
        fair value of $.03 per share for management services.
 
 D1.
        On
        July 6, 2007, the Company issued 8,000,000 shares of common stock with a
        fair value of $.022 per share for cover loss for $300,000
        financing.
 
 E1.
        On
        July 7, 2007, the Company issued 1,380,000 shares of common stock with a
        fair value of $.022 per share forcover the loss for
        daily/weekly/monthly financing/paying all the bills for the company since
        April
        2002 up to date to an officer.
 
 F1.
        On
        July 7, 2007, the Company issued 400,000 shares of common stock with a fair
        value of $.022 per share for management services.
 
 G1.
        On
        July 7, 2007, the Company issued 200,000 shares of common stock with a fair
        value of $.022 per share for legal services.
 
 H1.
        On
        July 7, 2007, the Company issued 200,000 shares of common stock with a fair
        value of $.022 per share for management services.
 
 I1.
        On
        July 18, 2007, the Company issued 250,000 shares of common stock with a
        fair value of $.03 per share for consulting services.
 
 J1.
        On
        Aug 7, 2007, the Company issued 250,000 shares of common stock with a fair
        value of $.03 per share for consulting services.
 
 H1.
        On
        Aug 31, 2007, the Company issued 800,000 shares of common stock with a fair
        value of $.026 per share for management services.
 
 J1.
        On
        Aug 31, 2007, the Company issued 1,500,000 shares of common stock with a
        fair value of $.026 per share forCover the loss for
        daily/weekly/monthly financing/paying all the bills for the company since
        April
        2002 up to today all.
    F-22
  **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 
 **7.**
              **SUPPLEMENTARY
                  NON-CASH INFORMATION**
 
 K1.
        On
        Sep 1, 2007, the Company issued 250,000 shares of common stock with a fair
        value
        of $0.026 per share for legal services.
 
 L1.
        On
        May 3, 2007 the company issued 755,000 shares of common stock with a fair
        value
        of $0.036 per share for legal services
 
 M1.
        On
        May 3, 2007 the company issued 1,780,000 shares of common stock with a fair
        value of $0.036 per share for management fees.
 
 N1.
        On
        May 3, 2007 the company issued 700,000 shares of common stock with a fair
        value
        of $0.036 per share for consulting fees.
 
 O1.
        On
        May 3, 2007 the company issued 45,000 shares of common stock with a fair
        value
        of $ .036 per share for accounting fees charged to professional fees
        expense.
 
 P1.
        On
        May 3, 2007 the company issued 400,000 shares of common stock with a fair
        value
        of $0.036 per share for loan repayment.
 
 Q1.
        On
        May 3, 2007 the company issued 1,000,000 shares of common stock with a fair
        value of $0.036 per share to cover loss financing to an officer.
 
 a.
              On
                  March 12, 2007, the Company issued 5,000,000 shares of common stock
                  with a
                  fair value of $.06 per share against loan
                  repayment.
 
 b.
              On
                  March 8, 2007, the Company issued 4,980,000 shares of common stock
                  with a
                  fair value of $.06 per share for consulting services charged under
                  finance
                  charges
 
 c.
              On
                  March 16,2007, the Company issued 150,000 shares of common stock
                  with a
                  fair value of $.076 per share for consulting
                  services
 
 d.
              On
                  March 8, 2007, the Company issued 13,050,000 shares of common stock
                  with a
                  fair value of $.06 per share for consulting
                  services
 
 e.
              On
                  February 23,2007, the company issued 59,400 shares if common stock
                  with
                  fair value of $0.1 per share for consulting
                  services
 
 f.
              On
                  January 30, 2007, the Company issued 5,000,000 shares of common
                  stock with
                  a fair value of $.115 per share as a deposit for the acquisition
                  of Xi’an
                  Meichen Pharmaceutical Co LTD
 
 g.
              On
                  January 30, 2007, the Company issued 200,000 shares of common stock
                  with a
                  fair value of $.0115 per share as a deposit for the acquisition
                  of
                  Beinjing Jifatang Chinese Medicine.
 
 h.
              On
                  January 30, 2007, the Company issued 120,000 shares of common stock
                  with a
                  fair value of $.115 per share for legal
                  services.
 
 i.
              On
                  January 26, 2007, the Company issued 13,000 shares of common stock
                  with a
                  fair value of $.14 per share for consulting
                  services
 
 j.
              On
                  January 8, 2007, the Company issued 9,000 shares of common stock
                  with a
                  fair value of $.061 per share for consulting
                  services.
 
 k.
              On
                  December 30, 2006, the Company issued 1,000,000 shares of common
                  stock
                  with a fair value of $.025 per share for consulting services; $25,000
                  is
                  included in consulting services for
                  2006.
   F-23
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 
 **7.**
              **SUPPLEMENTARY
                  NON-CASH INFORMATION**
 
  l.
              On
                  December 30, 2006, the Company issued 300,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $7,500
                  is
                  included in consulting services for
                  2006.
 
 m.
              On
                  December 30, 2006, the Company issued 150,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $3,750
                  is
                  included in consulting services for
                  2006.
 
 n.
              On
                  December 30, 2006, the Company issued 800,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $20,000
                  is
                  included in consulting services for
                  2006.
 
 o.
              On
                  December 29, 2006, the Company cancelled 875,000 shares of common
                  stock
                  with a fair value of $.025 per share due to cancellation of
                  services.
 
 p.
              On
                  December 29, 2006, the Company issued 880,000 shares of common
                  stock with
                  a fair value of $.025 per share to settle $22,000 of
                  debt.
 
 q.
              On
                  December 28, 2006, the Company issued 3,800,000 shares of common
                  stock
                  with a fair value of $.025 per share to settle $95,000 of
                  debt.
 
 r.
              On
                  December 28, 2006, the Company issued 700,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $17,500
                  is
                  included in consulting services for
                  2006.
 
 s.
              On
                  December 28, 2006, the Company issued 1,000,000 shares of common
                  stock
                  with a fair value of $.025 per share for consulting services; $25,000
                  is
                  included in consulting services for
                  2006.
 
 t.
              On
                  December 18, 2006, the Company issued 300,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $7,500
                  is
                  included in consulting services for 2006.u.
              On
                  December 18, 2006, the Company issued 150,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services ; $7,500
                  is
                  included in consulting services for 2006.
 
 v.
              On
                  December 18, 2006, the Company issued 150,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $7,500
                  is
                  included in consulting services for
                  2006.
 
 w.
              On
                  December 14, 2006, the Company issued 150,000 shares of common
                  stock with
                  a fair value of $.026 per share for Legal services; $3,900 is included
                  in
                  professional fees for 2006.
    F-24
    **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
   
 **7.**
              **SUPPLEMENTARY
                  NON-CASH INFORMATION**
 
  x.
              On
                  December 12, 2006, the Company issued 300,000 shares of common
                  stock with
                  a fair value of $.026 per share for consulting services; $7,800
                  is
                  included in consulting services for
                  2006.
 
 y.
              On
                  December 12, 2006, the Company issued 300,000 shares of common
                  stock with
                  a fair value of $.026 per share for consulting services; $7,800
                  is
                  included in consulting services for
                  2006.
 
 z.
              On
                  December 12, 2006, the Company issued 1,000,000 shares of common
                  stock
                  with a fair value of $.026 per share for Legal services; $26,000
                  is
                  included in professional fees for
                  2006.
 
 aa.
              On
                  December 12, 2006, the Company issued 1,000,000 shares of common
                  stock
                  with a fair value of $.026 per share for consulting services ;
                  $26,000 is
                  included in consulting services.
 
 bb.
              On
                  December 1, 2006, the Company issued 2,000,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $50,000
                  is
                  included in consulting fees for
                  2006.
 
 cc.
              On
                  November 27, 2006, the Company issued 150,000 shares of common
                  stock with
                  a fair value of $.025 per share for Legal services; $3,750 is included
                  in
                  professional fees for 2006.
 
 dd.
              On
                  November 27, 2006, the Company issued 100,000 shares of common
                  stock with
                  a fair value of $.025 per share for Legal services; $2,500 is included
                  in
                  professional fees for 2006.
 
 ee.
              On
                  November 26, 2006, the Company issued 1,500,000 shares of common
                  stock
                  with a fair value of $.025 per share to settle debt of $37,500
                  in
                  2006.
 
 ff.
              On
                  November 26, 2006, the Company issued 550,000 shares of common
                  stock with
                  a fair value of $.025 per share for Legal services; $13,750 is
                  included in
                  professional fees for 2006.
 
 gg.
              On
                  November 21, 2006, the Company issued 450,000 shares of common
                  stock with
                  a fair value of $.025 per share for Legal services; $11,250 is
                  included in
                  professional fees for 2006.
 
 hh.
              On
                  November 21, 2006, the Company issued 150,000 shares of common
                  stock with
                  a fair value of $.025 per share for management services; $3,750
                  is
                  included in management fee for
                  2006.
 
 ii.
              On
                  November 21, 2006, the Company issued 125,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $3,750
                  is
                  included in consulting fees for
                  2006.
   F-25
  
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
  
 **7.**
              **SUPPLEMENTARY
                  NON-CASH INFORMATION**
 
 jj.
              On
                  November 21, 2006, the Company issued 250,000 shares of common
                  stock with
                  a fair value of $.025 per share to settle debt of $6,250 in
                  2006.
 
 kk.
              On
                  November 20, 2006, the Company issued 1,400,000 shares of common
                  stock
                  with a fair value of $.025 per share for consulting services; $35,000
                  is
                  included in consulting services for
                  2006.
 
 ll.
              On
                  November 17, 2006, the Company issued 150,000 shares of common
                  stock with
                  a fair value of $.025 per share for Legal services; $3,750 is included
                  in
                  professional fees for 2006.
 
 mm.
              On
                  November 17, 2006, the Company issued 100,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $2,500
                  is
                  included in professional fees for
                  2006.
 
 nn.
              On
                  November 17, 2006, the Company issued 150,000 shares of common
                  stock with
                  a fair value of $.025 per share for PR services; $3,750 is included
                  in
                  consulting services for 2006.
 
 oo.
              On
                  November 17, 2006, the Company issued 500,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $12,500
                  is
                  included in consulting services for
                  2006.
 
 pp.
              On
                  November 17, 2006, the Company issued 200,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $5,000
                  is
                  included in consulting services for
                  2006.
 
 qq.
              On
                  November 17, 2006, the Company issued 800,000 shares of common
                  stock with
                  a fair value of $.025 per share to settle $20,000 of
                  debt.
 
 rr.
              On
                  November 17, 2006, the Company issued 500,000 shares of common
                  stock with
                  a fair value of $.025 per share for PR services; $12,500 is included
                  in
                  consulting services for 2006.
 
 ss.
              On
                  November 17, 2006, the Company issued 150,000 shares of common
                  stock with
                  a fair value of $.025 per share to settle $3,750 of
                  debt.
 
 tt.
              On
                  November 17, 2006, the Company issued 500,000 shares of common
                  stock with
                  a fair value of $.025 per share for consulting services; $12,500
                  is
                  included in consulting services for
                  2006.
 
 uu.
              On
                  November 16, 2006, the Company issued 800,000 shares of common
                  stock with
                  a fair value of $0.25 per share for PR services; $20,000 is included
                  in
                  consulting fees for 2006.
    F-26
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 **7.**
              **SUPPLEMENTARY
                  NON-CASH INFORMATION**
 
 vv.
              On
                  November 17, 2006, the Company issued 810,000 shares of common
                  stock with
                  a fair value of $.025 per share to settle $20,250 of
                  debt.
 
 ww.
              On
                  November 16, 2006, the Company granted warrants to acquire 2,000,000
                  shares of common stock exercisable at $0.20 per share for 5 years
                  as
                  compensation to the Companies current
                  president.
 
 xx.
              On
                  October 19, 2006, the Company issued 50,000 shares of common stock
                  with a
                  fair value of $.035 per share to settle $4,000 of
                  debt.
 
 yy.
              On
                  October 18, 2006, the Company issued 3,250,000 shares of common
                  stock in
                  consideration for consulting
                  services.
 
 zz.
              On
                  October 12, 2006 the Company granted warrants to acquire 11,650,000
                  shares
                  of common stock in consideration for consulting and management
                  services.
 
 aaa.
              On
                  October 12, 2006, the Company issued 10,000,000 shares and granted
                  warrants to acquire 10,000,000 shares of common stock exercisable
                  at $0.10
                  per share for five years and warrants to acquire 10,000,000 shares
                  of
                  common stock exercisable at $0.20 for ten years to settle $300,000
                  of
                  debt.
 
 bbb.
              On
                  October 4, 2006, the Company issued 200,000 common shares with
                  a fair
                  value of $0.03 per share to settle $6,000 of services
                  provided..
 
 ccc.
              On
                  September 27, 2006, the Company issued 200,000 common shares with
                  a fair
                  value of $0.03 per share for a loss on shares issued for lease
                  payments.
 
 ddd.
              On
                  September 27, 2006, the Company issued 400,000 common shares with
                  a fair
                  value of $0.03 per share for auto expenses, of which $12,00 is
                  included in
                  prepaid expenses.
 
 eee.
              On
                  September 27, 2006, the Company issued 125,000 common shares with
                  a fair
                  value of $0.045 per share for $5,625 of consulting services included
                  in
                  deferred compensation.
 
 fff.
              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.
 
 ggg.
              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-27
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
  
 **7.**
              **SUPPLEMENTARY
                  NON-CASH INFORMATION**
 
 hhh.
              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.
 
 iii.
              On
                  September 16, 2006, the Company issued 250,000 common shares with
                  a fair
                  value of $0.105 per share for $26,250 of consulting
                  services.
 
 jjj.
              On
                  September 1, 2006, the Company issued 500,000 common shares with
                  a fair
                  value of $0.09 per share for $45,000 of consulting
                  services.
 
 kkk.
              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.
 
 lll.
              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.
 
 mmm.
              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.
 
 ooo.
              On
                  February 21, 2006, the Company issued 300,000 shares with a fair
                  value of
                  $0.12 per share for $36,000 of consulting services. is included
                  in
                  deferred compensation.
 
 ppp.
              On
                  February 21, 2006, the Company issued 150,000 shares with a fair
                  value of
                  $0.12 per share for $18,000 of filing services. At September 30,
                  2006,
                  $7,685 is included in deferred
                  compensation.
 
 qqq.
              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.
 
 rrr.
              On
                  February 14, 2006, the Company issued 100,000 common shares with
                  a fair
                  value of $0.11 per share for $11,000 of consulting services, included
                  in
                  deferred compsnation.
 
 sss.
              On
                  February 2, 2006, the Company issued 90,000 common shares with
                  a fair
                  value of $0.25 per share for $22,500 of consulting services included
                  in
                  deferred compensation..
  ttt.
                On
                    January 28, 2006, the Company issued 200,000 common shares with
                    a fair
                    value of $0.19 per share for $38,000 of consulting services is
                    included as
                    a deferred compensation.
  F-28
   **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
 **7.  
          SUPPLEMENTARY NON-CASH INFORMATION**
 uuu.
              On
                  January 22, 2006, the Company issued 134,710 common shares with
                  a fair
                  value of $0.12 per share for $16,165 of consulting services is
                  included in
                  deferred compensation.
 
 vvv.
              On
                  January 22, 2006, the Company issued 150,000 common shares with
                  a fair
                  value of $0.12 per share for $18,000 of consulting services is
                  included as
                  a deferred compensation.
 
 xxx.
              On
                  January 22, 2006, the Company issued 100,000 common shares with
                  a fair
                  value of $0.12 per share for $12,000 of consulting services included
                  in
                  deferred compensation.
 
 yyy.
              On
                  January 18, 2006, the Company issued 300,000 common shares with
                  a fair
                  value of $0.11 per share for $33,000 of consulting services is
                  included in
                  deferred compensation.
 
 zzz.
              On
                  January 17, 2006, the Company issued 100,000 common shares with
                  a fair
                  value of $0.12 per share for $12,000 of consulting services is
                  included in
                  deferred compensation.
 
 aaaa.
              On
                  January 17, 2006, the Company issued 150,000 common shares with
                  a fair
                  value of $0.12 per share for $18,000 of consulting services is
                  included in
                  deferred compensation.
 
 bbbb.
              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)).
 
 
 F-29
  
 
 
 
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 
 **8.**
              **RELATED
                  PARTY TRANSACTIONS**
 
 The
        Company has entered into the following related party transactions:
 
 a)
              Recorded
                  management fees to directors and shareholders for the nine months
                  and
                  three months ended September 30, 2007 was $222,000 and $81,000,
                  respectively.
 
 b)
              Accrued
                  interest expense to directors and shareholders for the nine months
                  and
                  three months ended September 30, 2007 was $26,022 and $74,447,
                  respectively.
 
 
 
 **9.**
              **COMMITMENTS**
 
  On
        August
        3 2007, the Company has appointed Mr. Chen, Moxian as Senior Vice President
        of
        China Power, Inc., the company’s wholly owned subsidiary. The Company has paid a
        total of 250,000 common stocks/144 Rules in July 2007. Additional compensation
        will be based on further projects and performances basis.
  On
        July 1
        2007, the Company has appointed Ms. Guo, Yumin as the Company’s accountant. Ms.
        Guo  (Licensed CPA in PR China), who was appointed as the Company's
        accountant since September 2007. Ms. Guo was the chief accountant for 
W&G (Germanic) communication test instrument Ltd.  to handle
        Beijing head office accounting, and the other five local branch internal
        control, verification of account, approval budget, detail for inventory by
        location, and check tax filing, in dealing with tax bureau, make formal monthly,
        quarterly, annual records, provide financial data analysis report to overseas
        Group Financial Department.  Ms. Guo is also a audit manager
        for  Zhong Ding CPA Co.Ltd.  to Participated in the annual audit
        including development of the final certification report.
 
 On
        July1
        2007, the Company has appointed Mr. Farzam Kamalabadi as the Company’s Co- the
        chairman of its advisory board in Energy Section. The Company has agreed
        and
        paid to Mr. Farzam Kamalabadi for a total  of 5,000,000 common stocks
        as SEC 144 rules and legends and a total of 200,000 common stocks as SEC
        S-8
        Legends and also $10,000 USD in cash paid in July 2007 by the Company via
        Julianna Lu paid as Loan to the Company.
  On
        April
        3, 2007, the Company appointed Mr. Ron Shon as the chairman of its advisory
        board. Mr. Shon is the President of The Shon Group of Companies, a group
        of
        privately held real estate investment (such as the AAA+ Carsideral Office
        Building in downtown Vancouver, Canada) and development companies. Mr. Shon
        is
        also the President of China Education Resources Inc., and a director of the
        Spectra Group of Great Restaurants Inc. Mr. Shon holds a B.A. from Stanford
        University and a M.B.A. from the Wharton School, University of Pennsylvania.
        The
        Company has issued Mr. Shon for a total of 500,000 common stocks as SEC 144
        Rules and Legends and a total of 6,000,000 common stocks warrants at 0.20
        per
        warrant, exercise within one to three years.
  F-30
  
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 
 **9.**
              **COMMITMENTS
                  - continued**
 
  The
        Company has adjusted that The President Yu, Xiaofei’s compensation has
        adjusted to $7000 from $15,000, per month effective April 1, 2007. The due
        to
        reduce responsibilities and obligations.
 
 On
        February 9, 2006, Xiao Fei Yu was appointed as President of the Company.
        Mr. Yu
        has served as a Director of the Company since May 26, 2004 and was appointed
        as
        our Vice President on October 6, 2004. Mr. Yu has helped the Company create
        and
        develop 26 natural herbal product formulas that make up our King of Herbs
        and
        Taoist Medicine product lines. From 1997 to Present, Mr. Yu has been the
        President and Director of Taoist Tantric & Toltec Research and Development
        Centre located in Beijing, People's Republic of China. From 1998 to Present,
        Mr.
        Yu has been a Research Scientific Consultant of Central TCM Research and
        Development Institute located in Beijing, People's Republic of China. From
        1999
        to Present, Mr. Yu has been teaching Taoism, Taoist medicine and Indian
        classical philosophy & religion as a professor in the Department of
        Philosophy at the University of CCCP located in Beijing, People's Republic
        of
        China. From 1994 until 1999, Mr. Yu was an Associate Professor in Taoism,
        Taoist
        medicine, Buddhism and Scientific Philosophy in the Department of Philosophy
        at
        the University of CCCP.
 
 The
        Company has also entered into a Consulting Agreement with Mr. Yu pursuant
        to
        which Mr. Yu will provide global corporate development consulting services
        to
        the Company, including, advising the company with respect to global corporate
        development, strategic planning, global strategic partnership, business
        development and to assist the Company with identifying suitable acquisition
        candidates in the PR of China. The consulting agreement has a two years
        term with an initial review after six months and annual reviews thereafter,
        at which time, the terms of the consulting agreement, including compensation,
        may be amended upon the mutual agreement of the parties. In consideration for
        the consulting services, the Company agreed to a monthly compensation of
        $18,000
        USD which will accrue as a loan to the Company until as such time as the
        Company
        shall have closed a financing. In addition, the Company agreed to issue to
        Mr.
        Yu warrants to purchase 4,000,000 shares of common stock of the Company
        exercisable at a price of $0.20 per shares which shall be exercisable through
        February 8, 2012 or within 30 days of the termination of the Consulting
        Agreement.
 
 Also
        on
        February 9, 2007, the Company appointed Dr. Zheng-Lun Fan as a director of
        the
        Company. Dr. Fan has served as the Company's Vice President of Research &
Development since 2005. Over the past five years, Dr. Fan has been a research
        fellow at Beijing's Cui Yue-li Research Center of Traditional Chinese Medicine,
        where he is also Professor. Dr. Fan is nationally known as an expert in Chinese
        traditional medicine, which he has practiced for more than 40
        years.
 
 Dr.
        Fan
        was also appointed to serve as a member of the Company's Nominating Committee
        and Corporate Governance Committee.There are no understandings or arrangements
        between Dr. Fan and any other person pursuant to which Dr. Fan was selected
        as a
        director. Dr. .
 
 F-31
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 
 **9.**
              **COMMITMENTS
                  - continued**
 
 Fan
        does
        not have any family relationship with any director, executive officer or
        person
        nominated or chosen by us to become a director or executive officer
 
 The
        Company has also entered into a Consulting Agreement with Dr. Fan to provide
        global corporate development consulting services for the Company,
        including, advising the company with respect to global corporate development,
        strategic planning, global strategic partnership, business development and
        to
        assist the Company with identifying suitable acquisition candidates in the
        PR of
        China. The consulting agreement provides for a term of two years with an
        initial
        review after six months and annual reviews thereafter, at which time, the
        terms
        of the consulting agreement, including compensation, may be amended upon
        the
        mutual agreement of the parties. In consideration for the consulting services,
        the Company agreed to issue to Dr. Fan 500,000 shares of common stock pursuant
        to Section 4(2) of the Securities Act of 1933, as amended. In addition, the
        Company agreed to issue to Dr. Fan warrants to purchase 1,000,000 shares
        of
        common stock of the Company exercisable at a price of $0.20 per shares which
        shall be exercisable through February 8, 2012 or within 30 days of the
        termination of the Consulting Agreement.
 
 
 In
        addition, on February 9, 2007, the shareholders of the Company holding 2/3
        of
        the outstanding voting stock of the Company voter to remove DaHong Li as
        a
        director of the Company. Mr. Li will serve as a Vice-President of the Company
        on
        a consultancy basis.
  ***Acquisition
        Agreement with Tong Ren Kai Yu Minerals Co. Ltd. on Oct.27th
        2007***
  The
        Company has executed an acquisition agreement with Tong Ren Kai Yu Minerals
        Co.
        Ltd. on Oct.27th 2007
        for acquiring
        100% of Tong Ren Kai Yu Minerals Co. Ltd. with three mineral properties/mines
        and two mining licenses for producing rare metals (Vanadium (V2O5), Molybdenum
        (Mo), Uranium (U)) and with three exploration licenses approved by the Land
        & Resource Minister of the People’s Republic of China. See note to
        subsequent events.
  F-32
    **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 
 **9.**
              **COMMITMENTS
                  - continued**
 
  ***a).
        Agreement with Hunan Zhangjiajie Chalinhe Electric Power Co.,
        Ltd***
 
 On
        July
        27 2007, the Company’s wholly owned subsidiary, China Power, Inc. entered into
        an acquisition definitive agreement for the acquisition of Hunan Zhangjiajie
        Chalinhe Electric Power Co., Ltd and it’s Chalinhe Hydropower Station.
        The purchase price for the assets shall consist of (i) a cash payment in
        the
        amount of 380 million RMB (approximately USD$50 million), and (ii) the
        assumption of a bank loan in the amount of 300 million RMB ($USD40 million).The
        Chalinhe Hydropower Station comprises a reservoir with a dam 95 meters
        high and a total land position of 90,064 square meters. Specifications for
        the
        dam consist of a dead water level of 77 meters, design flood level of 88.31
        meters, check flood level of 92.81 meters and a total power generation capacity
        of 72,000 kW (4×18,000 kW). The first stage of the power station is to be
        completed in December 2007, when the total installed power production capacity
        will be approximately 54,000 kW. Addition, the Chalinhe Hydropower Station
        has full legal approved CDM rights and full legal rights for development of
        an additional 18,000 kW capacity to bring the total power generation capacity
        to
        72,000 kW.
 
 The
        Agreement contemplates that the transaction will be completed at a closing
        to be
        held on the first business day after the closing conditions are met or waived,
        or on a date agreed upon by the parties. The closing conditions include,
        but are
        not limited to: (i) the satisfactory completion by each party of a review
        of the
        business operations, finances, assets and liabilities of the other party,
        (ii)
        delivery of such certificates and closing documents as each party's counsel
        may
        request, and (iii) the approval of all of the shareholders of Hunan Zhangjiajie
        Chalinhe Electric Power Co., Ltd.
 
 F-34
 
 
 
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 **9.**
              **COMMITMENTS
                  - continued**
 
  b).
        Memorandum of Understanding with Aroma International Petroleum (HK) Co.
        Ltd.
  On
        July
        13, 2007, we executed a memorandum of understanding with Aroma International
        Petroleum (HK) Co, Ltd. for a joint venture investment partnership with Aroma
        International Petroleum (China), a wholly -owned subsidiary Aroma International
        Petroleum (HK) to complete development of a 1.2 million cubic meter
        (approximately 7.5 million barrel) oil storage facility (Tank Farm Area)
        and its
        auxiliary facilities.
  The
        MOU
        also provided China Holdings right of first refusal during the next 9 months
        for
        further development and investment in the joint venture investment partnership.
        The Companies agreed to execute a definitive agreement for their joint venture
        within approximately one month upon mutually agreeable terms.
   Under
        the
        terms of the MOU, China Holdings and Aroma International Petroleum agree
        to
        jointly invest, develop and construct the 1.2 million cubic meters oil storage
        facility (Tank Farm Area) and its auxiliary facilities, consisting of 2.2
        square
        kilometers located in Yangkou Port, China. The project will require a total
        investment of approximately $235 million and completion is expected in
        approximately 2 years. The complex will be comprised of a 1.2 million cubic
        meter oil tank complex including the oil tank block, logistic park, pipeline
        wharf and a complete pipeline system.
  On
        January 19, 2007, the Company executed an Acquisition Definitive Agreement
        (the
        "Agreement") with Beijing Boran Pharmaceuticals Co. Ltd. ("Beijing Boran")
        pursuant to which the Company will acquire 65% of the total issued and
        outstanding shares of Beijing Boran (the "Shares"). In exchange for the Shares
        the Company shall pay a consideration of USD $3,000,000. The consideration
        was
        determined based upon a total revenue of 32,000,000 RMB ( " China Currency")
        (approximately USD$4,118,000) (the "Revenue Target") and assets of 58,511,000
        RMB (approximately USD$7,530,000) for the year ended December 31, 2006 and
        revenue of $30,000,000 RMB (approximately USD$3,861,000 for the year ended
        December 31, 2005. The consideration shall be paid at the closing with
        USD$800,000 retained by the Company in the event that upon the completion
        of
        audited financial statements of Bejing Boran, the Revenue Target is not met.
        The
        consideration shall be reduced as agreed upon by the Company and Bejing
        Boran.
  On
          January 12, 2007, the Company entered into a binding Memorandum of Understanding
          ("MOU") with Beijing Jifatang Chinese Medicine Research Institute ("BJCMRI")
          and
          Beijing Jifatang Chinese Medicine Research & Development Institution
          ("BJCMRDI") for establishing the strategic partnership, collaboration and
          alliances for further research, development, manufacture and commercialization
          of new innovative pharmaceutical drugs for the treatment of diseases and
          conditions related to cancers, diabetes, cardiovascular disease, cerebral
          diseases and neurological disorders. The MOU provides that BJCMRI and BJCMRDI
          will grant to the Company first refusal rights and exclusive rights to
          acquire
          all rights to any new drugs and to any
    F-35
   **CHINA
          HOLDINGS INC.**
 **(a
          development stage company)**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (Unaudited)
  
 **9. 
          COMMITMENTS - continued**
 intellectual
          properties which BJCMRI and BJCMRDI may develop for a term of 10 years.
          As
          consideration for granting to the Company such first refusal and exclusive
          rights, the Company agreed to issue an aggregate of 200,000 restricted
          shares of
          its common stock to BJCMRI and BJCMRDI.
  d)  On
        January 1, 2007, the Company executed an Acquisition Definitive Agreement
        (the
        "Agreement") with Xi'An Meichen Pharmaceutical Co. Ltd. ("Xi'An Meichen")
        to
        acquire all of the assets of Xi'An Meichen. Pursuant to the Agreement, the
        Company has agreed to acquire from Xi'An Meichen its pharmaceutical
        manufacturing facilities which are certified by the China State Food and
        Drug
        Administration ("China -SFDA"), a total of 43 China-SFDA certified
        pharmaceutical drugs, and a total of 25 MU lands, which is approximately
        16,000
        square meters (collectively the "Assets"). In consideration for the Assets,
        the
        Company has agreed to issue 20,000,000 shares of restricted common stock
        and pay
        $12,000,000 RMB (USD $1,535,313) to Xi'An Meichen. The Agreement contemplates
        that the transaction will be completed at a closing to be held on the first
        business day after the closing conditions are met or waived (the "Closing
        Conditions"), or on a date agreed upon by the parties. The closing conditions
        include, but are not limited to: (i) the satisfactory completion by each
        party
        of a review of the business operations, finances, assets and liabilities
        of the
        other party, (ii) delivery of such certificates and closing documents as
        each
        party's counsel may request, and (iii) the approval of all of the shareholders
        of Xi'An Meichen.
  d) On
          December 12, 2006, the Board of Directors of the Company. terminated, Nick
          DeCotiis as President of the Company. The Company's Board of Directors
          appointed
          Julianna Lu, as President of the Company. Ms. Lu is the Founder, Chief
          Executive
          Officer and Chairman.
   f) On
          November 28, 2006,the Company executed a binding Acquisition Letter of
          Intent
          with Xi'an Chunhui Pharmaceuticals Co. Ltd. ("Xi'an Chunhui") for the proposed
          acquisition of 51% or more ownership of Xi'an Chunhui. Pursuant to the
          letter of
          intent, both parties have expressed their intent and support for the cooperation
          and accomplishment of the acquisition of Xi'an Chunhui, by the Company.
          Further,
          Xi'an Chunhui has agreed to offer the Company first refusal rights and
          legal
          exclusive rights for the acquisition of 51% or more ownership of Xi'an
          Chunhui
          within twelve months from the date of the Letter of Intent. Xi'an Chunhui
          has
          agreed to provide the Company with all necessary documentation and audited
          financial statements within 60days, to enable the Company to conduct 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.
 
 
 F-36
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 
 **9.**
              **COMMITMENTS
                  - continued**
 
 g)
              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.
  h)
              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.
  i)
              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).
  j)
              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.
  k)
              On
                  September 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.
 
 l)
              On
                  September 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.
 
 
 F-37
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 **9.**
              **COMMITMENTS
                  - continued**
 
 
 m)
              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.
  n)
              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.
  o)
              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.
  p)
              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.
  q)
              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.
   F-38
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
 
 **9.**
              **COMMITMENTS
                  - continued**
 
  r) 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.
  s)  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 Chief Executive
                  Officer 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**
 
  On
        October 6, 2007 the company granted 1,500,000 shares of common stock to a
        director and shareholder to extend current note and continue to fund the
        company..
 
 On
        October 6, 2007 the company granted 900,000 shares of common stock to the
        president for management fees.
 
 On
        October 6, 2007 the company granted 250,000 shares of common stock for legal
        fees.
 
 On
        October 6, 2007 the company granted 300,000 shares of common stock for
        consulting fees.
 
 On
        October 15, 2007 the company granted 200,000 shares of common stock for
        consulting fees.
   F-39
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
   
 **10.**
              **SUBSEQUENT
                  EVENTS - continued**
 
 
 On
        October 16, 2007 the company granted 1,500,000 shares of common stock for
        consulting fees.
 
 On
        October 15, 2006 the company granted 4,000,000 shares of common stock warrants
        for investor relations. Please see table below for the details of the
        warrants.
 
 Description
                  of warrants
              
              
              1,000,000
              
              
              
              1,000,000
              
              
              
              1,000,000
              
              
              
              1,000,000Date
                  of Grant
              
              10/15/2007
              
              
              10/15/2007
              
              
              10/15/2007
              
              
              10/15/2007Stock
                  Price @ grant date
              
              $
              0.033
              
              
              $
              0.033
              
              
              $
              0.033
              
              
              $
              0.033Exercise
                  Price
              
              $
              0.10
              
              
              $
              0.15
              
              
              $
              0.20
              
              
              $
              0.30Expected
                  life
              
              8
                  months
              
              
              12
                  months
              
              
              19
                  months
              
              
              24
                  monthsRisk
                  Free rate
              
              
              4.85
              %
              
              
              4.85
              %
              
              
              4.85
              %
              
              
              4.85
              %
   F-40
  **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (Unaudited)
  
 **10.**
              **SUBSEQUENT
                  EVENTS - continued**
 
 On
          October 10th28th
          , and October
          29th , 2007
          the
          Company entered into a series of agreement to develop and construct biomass
          renewable energy facilities in the Peoples Republic of China. The development
          and contruction of the facilites will require approximately $78,000,000.
          The
          development and construction of the facilities are subject to the Company
          completing certain duel diligence requirements and obtaining financing
          from
          third parties. Thew Company currently has no commitments for financing
          the
          construction and development of the planned biomass facilites.
  On
          October 27, 2007, the Company entered into an acquisition agreement with
          Tong
          Ren Kai Yu Minerals, Ltd. to acquire certain mineral and miming properties
          and
          licenses located in the Peoples Republic of China in exchange for approximately
          $ 26,750,000 shares of the Company's restricted common stock and approximately
          $
          13,500,000 in cash. The acquisition is subject to the Company completing
          certain
          duel diligence requirements and obtaining financing from third parties.
          The
          Company currently has no commitments for financing the transaction.
  F-41


**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 and changed our name on May 25, 2004, to
      China Health Holding, Inc. On May 1, 2007, we changed our name to China
      Holdings, Inc. Effective May 11, 2007, our stock trades under the symbol CHHL
      on
      the OTC Bulletin Board. The Company maintains a website at
      www.chinaholding.net.





We
      have
      had nominal revenues since our inception.





The
      Company has two wholly-owned subsidiaries: (i) China Power, Inc., and (ii)
      China
      Health Holdings, Inc. The Company intends to form a third subsidiary to pursue
      the Company mining projects.





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





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




China
      Power Inc.– is a development stage company with the goal of becoming a
      global energy holding corporation that will focus on the merger and
      acquisitions, investment, research and development, construction and operation
      of energy and renewable energy and environment protection projects in China
      and
      worldwide.





China
      Health Holdings, Inc. - is a development stage company with the goal of
      becoming a leading developer, manufacturer, marketer and distributor of
      pharmaceutical drugs and dietary supplements in China and worldwide. The
      Company's main objective is to partner with China -- SFDA approved drug
      producers, GMP certified manufacturing facilities, research and development
      centers and universities in China.




**Operations
      Plans**




3




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




China
      Power Inc.China Power intends
      to capture China's
      growing energy, renewable energy, and environment protection projects
      domestically and worldwide. China Power, Inc. intends to engage in business
      activities and investments in Hydropower Plants, biomass energy projects and
      companies in China, and/or worldwide, and expects to reach a total hydropower
      capacity from 150 MW to 1,600 MW annually within the next 1-4 years, primarily
      through mergers and acquisitions, joint-venture partnerships with hydro-power
      plants biomass energy projects and companies in China, and/or worldwide. The
      Company’s advanced hydro-power renewable energy strategy and plan is expected to
      improve the technical, societal, and environmental benefits of hydropower,
      biomass energy and provide investment and business activities in the
      cost-competitive hydropower and biomass energy supply in China and worldwide,
      with a focus towards building the Company’s long-term shareholder value. China
      Power intends to seek financing to fund its hydropower and biomass energy
      projects.  Financing transactions may include the issuance of equity
      or debt securities, obtaining credit facilities, or other financing mechanisms.
      There can be no assurance that we will be successful in obtaining
      financing.




China
      Health Holdings, Inc. a wholly owned subsidiary of China Holdings, Inc., is
      a development stage company with the goal of becoming a leading developer,
      manufacturer, marketer and distributor of pharmaceutical drugs and dietary
      supplements in China and worldwide. Our main objective is to partner with CHINA
      -- SFDA approved drug producers, GMP certified manufacturing facilities,
      research and development centers and universities in China. Our goals for
      2007-2009 include the profitable penetration of the Chinese pharmaceutical
      industry by merger and acquisition (M&A) leading pharmaceutical companies in
      the China. Our strategy is to leverage synergies, integrate drug pipelines
      and
      distribution channels, and management expertise between pending pharmaceutical
      acquisitions. We intend to develop a Taoist Medicine product line and a Vitamins
      and Supplements product line over the next twelve months. All of the products
      for these product lines are fully developed and we expect to launch the Taoist
      Medicine and Vitamins and Supplements product lines within the next twelve
      months. All of our manufacturing will be outsourced to third parties. We plan
      to
      generate revenues by sales of our herbal supplement products (1) through a
      website that is currently under construction, (2) through retail and wholesale
      distributors, and (3) through the establishment of retail stores in major cities
      in North America. All of our manufacturing will be outsourced to third parties.
      We plan to generate revenues by sales of our herbal supplement products (1)
      through a website that is currently under construction, (2) through retail
      and
      wholesale distributors, and (3) through the establishment of retail stores
      in
      major cities in North America. While in the past our current operations and
      sales were in Canada, we anticipate expanding our sales into the United States
      over the next six to twelve months and, thereafter, into regions of Europe
      and
      Asia.




**RESULTS
      OF OPERATIONS**




**Nine
      Months ended September 30, 2007 as compared to the nine months ended September
      30, 2006**





We
      had a net loss of $4,557,372 for
      the nine months ended September 30, 2007 as compared to a net loss of
      $1,647,489 for the nine months ended September 30 2006. The net loss
      for the nine months ended September 30, 2007 consisted primarily of
      $1,369,179 of consulting fees, $567,120 of management fees, $120,316 of
      professional fees, $374,702 of interest and bank charges, $24,092 in rent,
      $11,518 of travel expenses, $13,290 of office expenses, ($164,977) of
      investor relations expenses, $3,986 in depreciation expenses, $31,830
      of advertising and promotional expenses,  and $5,257 of vehicle
      expenses. The increase in net loss for the nine months ended September 30,
      2007 was primarily the result of an increase in consulting fees,
      advertising and promotion, interest and bank charges, and
      rent.





Other
      Income (Expenses) was $22,557 for the nine months ended September 30, 2007
      as compared to ($9,212) for the nine months ended September 30, 2006. The
      increase is attributed primarily to a loss on settlement of debt and issuance
      of
      shares of $16,728 recognized during the nine months ended September 30, 2007
      compared to ($7,881) for the nine months ended September 30,2006.





**Three
      months ended September 30, 2007 compared to three months ended September 30,
      2006**





We
      had a net loss of $916,550 for the three months ended September 30, 2007 as
      compared to a net loss of $431,812 for the three months ended September 30
      2006.
      The net loss for the three months ended September 30, 2007 consisted primarily
      of $283,503 of consulting fees, $267,735 of management fees, $35,592 of
      professional fees, $26,442 of interest and bank charges, $6,051 in rent, $2,667
      of travel expenses, $2,845 of office expenses, $31,426 of investor relations
      related travel costs, $1,739 in depreciation expenses, $13,190 of advertising
      and promotional expenses. The increase in net loss for the three months ended
      September 30, 2007 was the result of an increase in investor relations,
      management fees and consulting fees.





Other
      Income (Expenses) was $0 for the three months ended September 30, 2007 as
      compared to ($8,073) for the three months ended September 30, 2006.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of September 30, 2007, we had cash of $4,837. Our current liabilities as of
      September 30, 2007 aggregated $1,195,291. As of September 30, 2007, we had
      a
      working capital deficiency of $1,183,104 and an accumulated deficit of
      $13,750,749.. In order to sustain our current level of operations, we will
      need
      to raise at least $1 million over the twelve months. In order to expand our
      business, fund future development and pursue our acquisition strategy, we
      will need to raise at least $150 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.




4




As
      of September 30, 2007, we had outstanding loans to our CEO, Julianna Lu in
      the
      amount of $894,121 and to our President, XiaoFei Yu in the amount of
      $266,390.  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.





While
      we
      have raised capital to meet our working capital and financing needs in the
      past,
      additional financing is required within the next 12 months in order to meet
      our
      current and projected cash flow deficits from operations and development. We
      have sufficient funds to conduct our operations for 12 months or more. Further,
      in order to expand our business, fund future development and begin marketing
      and
      selling our three products lines and pursue our acquisition strategy, we will
      need to raise at least $50 million over the next twelve to twenty-four months.
      There can be no assurance that financing will be available in amounts or on
      terms acceptable to us, if at all.





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





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





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





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





We
      expect
      to spend approximately $200,000 over the next six months to work with scientific
      consultants in the People's Republic of China for the purpose of identifying
      and
      evaluating potential acquisition candidates that operate in the areas of energy
      and renewable energy technologies and the mineral resources. We anticipate
      that
      any such energy and/or renewable energy acquisition technologies or projects
      and
      mineral resources projects will require approval by the Chinese Government.
      If
      approval of such with new technologies or projects by the Chinese Government
      or
      any other foreign regulators is delayed or cannot be obtained, we will be forced
      to delay our plans to acquire, market and/or sell these technologies or
      projects. Any such delay could adversely affect our operations.





As
      part
      of our growth strategy, we are currently in negotiations with respect to a
      number of with new acquisition projects in the areas of energy and renewable
      energy, minerals, utilities, real estate, finance and pharmaceutical products.
      However, except as otherwise disclosed by the Company, no formal agreements
      with
      respect to any such additional proposed with acquisition(s) have been completed
      or entered into. Proposing, negotiating and implementing any such arrangements
      or agreements 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 any such projects
      or technologies, we will be required to raise additional capital for research
      and development, regulatory review and marketing efforts associated with such
      products or technologies, all of which will be required before any such projects
      or technologies are likely to 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 these efforts.
      However, no assurance can be given that additional financing will be available,
      or if available, will be on acceptable terms.





**RECENT
      DEVELOPMENTS**




5




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





The
        Company entered in an acquisition agreement which provides for the acquisition
        by the Company of 100% of the issued and outstanding shares of Tong Ren KaiYu
        Minerals Co. Ltd. In consideration for the shares, the Company agreed to
        pay (A)
        RMB $100 million (approximately USD $13,500,000) in cash; (B) RMB $50 million
        (approximately USD $6,750,000) in shares of common stock valued at a price
        of
        $0.05 per shares; (C) RMB $150 million (approximately USD $20 million) in
        shares
        of common stock valued at the average of closing price of the Company’s common
        stock in the 5 day period prior to closing and the 5 day period after the
        closing. Ton Ren KaiYu owns  three mineral
        properties,  two****mining production licenses, and
        three mining****exploration
        licenses.****Tong Ren KaiYu has agreed to provide the Company
        with legal exclusive/first refusal rights for this acquisition. The parties
        have
        agreed to provide each other with all documentation necessary to complete
        their
        due diligence investigation of each company’s business.
 
 The
        Company agreed to issue 7,000,000 shares of its common stock within 30 days
        of
        the date of agreement as a security deposit. The parties agreed that if the
        Company does not consummate the transaction, then, Ton Ren KaiYu shall have
        the
        right to retain the shares. However, if Ton Ren KaiYu does not complete its
        obligations under this agreement the Company will be permitted to put Stop
        transfer restrictions on the shares.


Within
      60
      to 90 days, upon the completion of its due diligence investigation and receipt
      of approval from the China government, the Company agreed to pay to Ton Ren
      KaiYu RMB $33million (approximately USD $4.5 mullion) in cash and RMB $67
      million (approximately USD $9 million) in shares of the Company’s common stock
      in exchange for 33.3% of the issued shares of Ton Ren KaiYu and the mining
      licenses of Ton Ren KaiYu.





Within
      90
      to 180 days, the Company will complete mining feasibility studies of the Tong
      Ren KaiYu’s mining properties and upon completion will pay to Ton Ren KaiYu
      RMB$67,000,000 (approximately USD $ million in cash and RMB$ 133,000,000
      (approximately USD $18 million) shares of the Company’s common
      stock  in exchange for 66.7% of the issued shares of Ton Ren
      KaiYu.





The
      Company intends to form a subsidiary in Hong Kong to complete the
      acquisition.




***TaiHu
      Biomass Energy Power/Plant Investment Construction
      Agreement***





On
      October 28, 2007, the Company’s subsidiary, China Power, Inc., entered into an
      agreement to cooperate with China Anhui TaiHu government to develop and
      construct a biomass energy power generation plant with a power capacity of
      50MW.
      The parties will enter into a formal agreement for the project upon the approval
      of TaiHu government. The parties estimate that it will take 2 years to complete
      the construction of the biomass energy generation plant.





Pursuant
      to the terms of the agreement the TaiHu government will be responsible for
      (A)
      the coordination with the state, provincial and city governments; (B) providing
      the Company with certain services to assist the Company with the biomass energy
      project; (C) providing the Company with 200 MU(1MU=667 square meter) lands
      for a
      term of 40 years and an additional 10-15 MU lands  for a term of 40
      years for the cultivation of the straw necessary for the biomass
      project;  (D)providing tax incentives to the Company upon completion
      of the project; (E)  guaranteeing a supply of stray and other biomass
      resources to the Company; (F) guaranteeing the water supply to the biomass
      energy power generation plant upon completion of the
      construction.  Pursuant to the terms of the Agreement, the Company
      will be responsible for construction of the water supply pipeline which will
      be
      reimbursed by the TaiHu government upon completion of the project. The Company
      will also be responsible for all cost for the construction of the biomass energy
      plant. The parties anticipate that the total cost of this project will be
      RMB$380 million (USD$78 million) comprising of a cash investment of 35% and
      bank
      loans of 65% and estimates that the project will be completed in
      2010.





The
      TaiHu
      government has agreed to provide the Company will legal exclusive rights for
      the
      construction and operation of the plant and agreed not to engage in the
      construction of a similar biomass plant in the TaiHu County.




***LongHua
      County Biomass Energy Power Plan Project Investment and Construction
      Agreement***





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




6




Pursuant
      to the terms of the agreement, the LongHua government will be responsible for
      (A) the coordination with the state, provincial and city governments; (B)
      registration of the project with the required governmental bodies; (C) providing
      tax incentives to China Power upon completion of the project; (D) assisting
      the
      Company with obtaining an additional 10-15 MU lands for the cultivation of
      the
      necessary biomass resources; and (E) allowing the Company to construct a well
      to
      provide water for construction of the plant.





The
      Company agreed to provide the LongHua government with RMB$1.65 million
      (approximately USD$222,000) in connection with the documentation and approval
      process necessary for the construction permits for the biomass
      plant.  The LongHua government has agreed to provide the Company will
      legal exclusive rights for the construction and operation of the plant and
      agreed not to engage in the construction of a similar biomass
      plant.




***Agreement
      for Cooperation with Con Yang County Government***





On
      October 29, 2007, the Company’s subsidiary, China Power, Inc., entered into an
      agreement to cooperate with the Con Yang Government. Pursuant to the agreement
      the Con Yang Government agreed to provide the Company with 200 MU lands in
      the
      Con Yang economic industry zone to develop and construct a biomass energy
      generation plant. The agreement contemplates the entry into a Lands Rights
      Agreement with the Con Yang Government Land & Resources Department for a
      term of 50 years. The parties anticipate that the total cost of the project
      to
      be RMB $580 million (approximately USD$78 million) comprising of a cash
      investment of 35% and bank loans of 65% and anticipate completion in 2010.
      The
      Agreement provides that the Con Yang Government will provide the Company will
      the lands for the cultivation of the straw and raw materials necessary for
      the
      project for a term of 50 years. In addition, the Agreement provides that it
      will
      be effective in 6 months until China provides a biomass projects feasibility
      study and contemplates the entry into a further agreement for execution of
      the
      biomass energy projects.




***Agreement
      with Hunan Zhangjiajie Chalinhe Electric Power Co.,
      Ltd***





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





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





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





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





***Memorandum
      of Understanding with Aroma International Petroleum (HK) Co.
      Ltd.***





On
      July
      13, 2007, we executed a memorandum of understanding with Aroma International
      Petroleum (HK) Co, Ltd. for a joint venture investment partnership with Aroma
      International Petroleum (China), a wholly -owned subsidiary Aroma International
      Petroleum (HK) to complete development of a 1.2 million cubic meter
      (approximately 7.5 million barrel) oil storage facility (Tank Farm Area) and
      its
      auxiliary facilities.




The
      MOU
      also provided China Holdings right of first refusal during the next 9 months
      for
      further development and investment in the joint venture investment partnership.
      The Companies agreed to execute a definitive agreement for their joint venture
      within approximately one month upon mutually agreeable terms.





Under
      the
      terms of the MOU, China Holdings and Aroma International Petroleum agree to
      jointly invest, develop and construct the 1.2 million cubic meters oil storage
      facility (Tank Farm Area) and its auxiliary facilities, consisting of 2.2 square
      kilometers located in Yangkou Port, China. The project will require a total
      investment of approximately $235 million and completion is expected in
      approximately 2 years. The complex will be comprised of a 1.2 million cubic
      meter oil tank complex including the oil tank block, logistic park, pipeline
      wharf and a complete pipeline system.




7





**Future
      Development**





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




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





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





*Acquisition
      of Plant and Equipment and Other Assets*





If
      we
      successfully close on the acquisition of the
      Chalinhe Hydropower Station we will acquire material property, plant
      or equipment during the next 12 months.





*Number
      of Employees*





From
      our
      inception through the period ended September 30, 2007, we have principally
      relied on the services of outside consultants and part-time employees for
      services. We currently have six (6) full time employees and 25 part-time
      employees. In order for us to attract and retain quality personnel, we
      anticipate we will have to offer competitive salaries to future employees.
      We
      anticipate that it may become desirable to add additional full and or part
      time
      employees to discharge certain critical functions during the next 12 months.
      This projected increase in personnel is dependent upon our ability to generate
      revenues and obtain sources of financing. There is no guarantee that we will
      be
      successful in raising the funds required or generating revenues sufficient
      to
      fund the projected increase in the number of employees. As we continue to
      expand, we will incur additional cost for personnel.





**Recently
      issued accounting pronouncements**




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







8





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.




**RISK
      FACTORS**




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




**RISKS
      RELATED TO OUR FINANCIAL CONDITION**




**Our
      Financial Status Creates Doubt Whether We Will Continue As A Going
      Concern.**




We
      reported net losses totaling of $4,557,372, and $1,647,489 for the nine months
      ended September 30, 2007 and September 30, 2006, respectively. As of
      September 30, 2007, we had a working capital deficiency of
      $1,183,104  (current assets less current liabilities) and an
      accumulated deficit of $13,750,749. With our current resources we expect to
      be
      able to satisfy our cash requirements through September 30, 2008. However,
      in
      order to expand our current business operations, fund future development and
      market, sell our three existing product lines and completed our acquisition
      projects we will need to raise at least $50 million in financing over the next
      twelve months. There are no assurances that we will be able to achieve a level
      of revenues adequate to generate sufficient cash flow from operations or obtain
      additional financing through private placements, public offerings and/or bank
      financing necessary to support our working capital requirements. To the extent
      that funds generated from any private placements, public offerings and/or bank
      financing are insufficient, we will have to raise additional working capital.
      No
      assurance can be given that additional financing will be available, or if
      available, will be on acceptable terms. These conditions raise substantial
      doubt
      about our ability to continue as a going concern. If adequate working capital
      is
      not available we may be forced to discontinue operations, which would cause
      investors to lose the entire amount of their investment.




9




**We
      Need Significant Infusions Of Additional Capital, Which May Result In Dilution
      To Our Shareholders' Ownership And Voting Rights In Our
      Company.**




Based
      upon our current cash reserves and forecasted operations, we believe that we
      will need to obtain at least $2 million of outside funding in order to sustain
      our current business operations over the next twelve months, and at least $150
      million of outside funding in order to expand our business, fund future
      development and complete our acquisition projects.  We have entered
      into an agreement to acquire the Chalinhe Hydropower Station, which requires
      a
      cash payment of approximately USD$50 million and the assumption of a bank loan
      of approximately USD $40 million. In addition, we have entered into an agreement
      to acquire Ton RenKaiYu for a combination of cash in the amount of USD $13.5
      million and stock in the aggregate amount of $26,750,000. We have also entered
      into agreements to cooperate to construct two biomass energy plants which will
      require an investment in excess of USD$80 million. We have not in the past
      raised any funds and our operations have been funded primarily through loans
      from our officers and the issuance of shares of our common stock. Our need
      for
      capital to finance our business strategy, operations, and growth will be greater
      should, among other things, revenue or expense estimates prove to be incorrect.
      If we fail to arrange for sufficient capital in the future, we may be required
      to reduce the scope of our business activities, terminate our acquisition
      agreements and curtail plans to construct the biomass plants. In addition,
      we
      may not be able to obtain additional financing in sufficient amounts or on
      acceptable terms when needed, which could adversely affect our operating results
      and prospects. Debt financing must be repaid regardless of whether or not we
      generate profits or cash flows from our business activities. Equity financing
      may result in dilution to existing shareholders and may involve securities
      that
      have rights, preferences, or privileges that are senior to our common
      stock.





**The
      Issuance Of Shares Of Our Common Stock To Fund Our Operations And As
      Consideration At The Closing Of Our Acquisition Targets Will Result In
      Significant Dilution To Our Existing Shareholders.**




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




**RISKS
      RELATED TO OUR BUSINESS**




**We
      Are A Development Stage Company And Have A Limited Operating History Upon Which
      An Evaluation Of Our Company Can Be Made. For That Reason, It Would Be Difficult
      For A Potential Investor To Judge Our Prospects For
      Success.**




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





**If
      We Fail To Adequately Protect Or Enforce Our Intellectual Property Rights,
      Competitors May Produce And Market Products Similar To Ours. In Addition, We
      May
      Be Subject To Intellectual Property Litigation And Infringement Claims By Third
      Parties.**




Our
      ability to compete effectively in the natural medicinal industry 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.




10




**We
      May Incur Material Product Liability Costs.**




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




**If
      We Are Not Able To Manage Growth Of Our Business, Our Financial Condition And
      Results Of Operations Will Be Negatively Affected.**




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




**Our
      Strategy Of Growth Through Acquisition Is Inherently
      Risky.**





Our
      strategy is 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 agreements to acquire Hunan Zhangjiajie
      Chalinhe Electric Power Co. and Tong Ren Kai Yu Minerals Co. 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 the agreements. We have also
      entered into agreements to cooperate to construct biomass energy power plants
      in
      China. These agreements require the investment of significant capital and
      require the approval of the appropriate administrative and regulatory bodies
      in
      China.





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


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





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




**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 neutraceutical 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.




11




**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 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.






**RISKS
      RELATED TO OUR COMMON STOCK**




**There
      Is A Limited Public Market For Our Common Stock. Failure To Develop Or Maintain
      A Trading Market Could Negatively Affect The Value Of Our Shares And Make It
      Difficult Or Impossible For Shareholders To Sell Their
      Shares.**





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




**OUR
      COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE TRADING
      MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR COMMON
      STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR
      STOCK.**




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




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




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




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




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




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




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




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




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




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




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





12





**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.




**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
      July
      6, 2007, the Company issued 800,000,000 shares common shares as consideration
      for a loan to the Company by its Chief Executive Officer.





On
      August
      7, 2007, the Company issued 250,000 shares for consulting services.





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**





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





The
      Company entered in an acquisition agreement which provides for the acquisition
      by the Company of 100% of the issued and outstanding shares of Tong Ren KaiYu
      Minerals Co. Ltd. In consideration for the shares, the Company agreed to pay
      (A)
      RMB $100 million (approximately USD $13,500,000) in cash; (B) RMB $50 million
      (approximately USD $6,750,000) in shares of common stock valued at a price
      of
      $0.05 per shares; (C) RMB $150 million (approximately USD $20 million) in shares
      of common stock valued at the average of closing price of the Company’s common
      stock in the 5 day period prior to closing and the 5 day period after the
      closing. Ton Ren KaiYu owns  three mineral
      properties,  two****mining production licenses, and
      three mining****exploration
      licenses.****Tong Ren KaiYu has agreed to provide the Company
      with legal exclusive/first refusal rights for this acquisition. The parties
      have
      agreed to provide each other with all documentation necessary to complete their
      due diligence investigation of each company’s business.





The
      Company agreed to issue 7,000,000 shares of its common stock within 30 days
      of
      the date of agreement as a security deposit. The parties agreed that if the
      Company does not consummate the transaction, then, Ton Ren KaiYu shall have
      the
      right to retain the shares. However, if Ton Ren KaiYu does not complete its
      obligations under this agreement the Company will be permitted to put Stop
      transfer restrictions on the shares.




13




Within
      60
      to 90 days, upon the completion of its due diligence investigation and receipt
      of approval from the China government, the Company agreed to pay to Ton Ren
      KaiYu RMB $33million (approximately USD $4.5 mullion) in cash and RMB $67
      million (approximately USD $9 million) in shares of the Company’s common stock
      in exchange for 33.3% of the issued shares of Ton Ren KaiYu and the mining
      licenses of Ton Ren KaiYu.





Within
      90
      to 180 days, the Company will complete mining feasibility studies of the Tong
      Ren KaiYu’s mining properties and upon completion will pay to Ton Ren KaiYu
      RMB$67,000,000 (approximately USD$9 million in cash and RMB$ 133,000,000
      (approximately USD $18 million) shares of the Company’s common
      stock  in exchange for 66.7% of the issued shares of Ton Ren
      KaiYu.





**ITEM
      6. EXHIBITS –**





10.1
            
            LongHua
                Biomass Energy Power Plant Project Investment and Construction Agreement
                dated October 10, 200710.2
            
            Chinese/English
                Translation of Exhibit 10.1 - LongHua Biomass Energy Power Plant
                Project
                Investment and Construction Agreement dated October 10,
                200710.3
            
            Taihu
                Biomass Energy Power Plant Project Investment Construction Agreement
                dated
                October 28, 200710.4
            
            Chinese/English
                Translation of Exhibit 10.3 - Taihu Biomass Energy Power Plant Project
                Investment Construction Agreement dated October 28,
                200710.5
            
            Acquisition
                Purchase Agreement between China Holdings, Inc. and Tong RenKaiYu
                Minerals, Co. Ltd. dated October 27, 200710.6
            
            Chinese/English
                Translation of Exhibit 10.5- Acquisition Purchase Agreement between
                China
                Holdings, Inc. and Tong RenKaiYu Minerals, Co. Ltd. dated October
                27,
                200710.7
            
            Agreement
                for Cooperation between Con Yang County Government and China Power,
                Inc.
                dated October 29, 200710.8
            
            Chinese/English
                Translation of Exhibit 10.7- Agreement for Cooperation between Con
                Yang
                County Government and China Power, Inc. dated October 29,
                200731.1
            
            Certification
                by Chief Executive Officer/Chief Financial Officer, required by Rule
                13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 200232.1
            
            Certification
                by Chief Executive Officer/Chief Financial Officer, required by Rule
                13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350
                of
                Chapter 63 of Title 18 of the United States Code, promulgated pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002




14





**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.






China Holdings,
              Inc.Dated:  November
                16,
                2007
            By:
            /s/ *Julianna
              Lu*Julianna
              LuChief
              Executive Officer,
              PrincipalFinancial
              Officer, Principal
              Accounting Officer, Treasurer and Chairman of the Board of
              Directors


15