**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 MARCH 31, 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**




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


(Address
      of principal executive offices) (Zip Code)




Issuer’s
      telephone Number: **1** **(877)
      883-0979**




**Mailing
      Address**


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




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




Copies
      to:


Richard
      A. Friedman, Esq.


Sichenzia
      Ross Friedman Ference LLP


1065
      Avenue of the Americas


New
      York,
      New York 10018


Phone:
      (212) 930-9700


Fax:
      (212) 930-9725






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




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




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




Yes
      [ x ]
      No [ ]




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




Yes
      [ ]
      No [ x ]




Total
      revenues for quarter ended March 31, 2007 were $0







1




**CHINA
      HOLDINGS, INC.**




**FORM
      10-QSB**




**For
      the Fiscal Quarter Ended March 31, 2007**







Part
                  I
              
              PageItem
                  1. Financial Statements.
              
              
              4Item
                  2. Management's Discussion and Analysis or Plan of
                  Operations.
              
              
              29Item
                  3. Controls and Procedures
              
              
              53Part
                  ll
              
              
              PageItem
                  1. Legal Proceedings.
              
              
              53Item
                  2. Unregistered Sale of Equity Securities and Use of
                  Proceeds
              
              
              53Item
                  3. Defaults Upon Senior Securities
              
              
              54Item
                  4. Submission of Matters to a Vote of Security Holders.
              
              
              54Item
                  5. Other Information
              
              
              54Item
                  6. Exhibits.
              
              
              54Signatures.
              
              
              55


2





**CHINA
      HOLDINGS, INC.**





**(a
      development stage company)**


CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS





March
      31,
      2007





(Unaudited)





**UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEETS**




**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**




**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**




**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**








3


**CHINA
                  HOLDINGS INC.****(a
                  development stage company)****CONDENSED
                  CONSOLIDATED BALALNCE SHEET****(Unaudited)**March
                  31,
              
              December
                  31,2007
              
              2006**ASSETS**
              
              
              
              (Audited)**CURRENT
                  ASSETS**Cash
              
              $
              15,940
              
              $
              -Prepaid
                  expenses and other current assets
              
              
              61,390
              
              
              97,759Total
                  current assets
              
              
              77,330
              
              
              97,759**PROPERTY
                  AND EQUIPMENT**,
                  net**(Note
                  4)**
              
              
              607,631
              
              
              10,369**Intangible
                  Assets (Note 3)**
              
              
              3
              
              
              3**TOTAL
                  ASSETS**
              
              $
              684,964
              
              $
              108,131***LIABILITIES
                  AND STOCKHOLDERS’ (DEFICIT)*****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued liabilities
              
              $
              34,069
              
              $
              35,007Due
                  to shareholders**(Note
                  5)**
              
              
              817,583
              
              
              875,822Total
                  current liabilities
              
              
              851,652
              
              
              910,829**COMMITMENTS
                  (Notes 3 and 9)****DEFICIENCY
                  IN SHARESHOLDER EQUITY**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 authorized135,328,460
                  (December 31, 2006-106,747,060) shares issued and outstanding**(Note 6)**
              
              
              135,329
              
              
              106,747Additional
                  paid-in capital
              
              
              12,357,035
              
              
              8,496,543Deferred
                  compensation**(Note
                  6 and 7)**
              
              
              (124,501
              )
              
              (153,942
              )Deficit
                  accumulated during the development stage
              
              
              (12,472,620
              )
              
              (9,193,377
              )Accumulated
                  other comprehensive loss
              
              
              (63,181
              )
              
              (59,919
              )Total
                  Stockholders’ Deficit
              
              
              (166,688
              )
              
              (802,698
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS’ (DEFICIT**)
              
              $
              684,964
              
              $
              108,131See
                  Notes to Unaudited Condensed Consolidated Financial
                  Statements






4


**CHINA
                  HOLDINGS INC.****(a
                  development stage company)****CONDENSED
                  CONSOLIDATED STATEMENTOF OPERATIONS & COMPREHENSIVE
                  LOSSES****(Unaudited)**For
                  the
              
              For
                  the
              
              Culmulative
                  results ofThree
                  Month
              
              Three
                  Month
              
              operations
                    fromEnded
              
              Ended
              
              April
                  3, 2002March
                  31
              
              March
                  31
              
              (Inception)2007
              
              2006
              
              to
                  March 31, 2007**SALES**
              
              
              
              
              $
              -
              
              $
              -
              
              $
              8,976Cost
                  of goods sold
              
              
              
              
              
              -
              
              
              -
              
              
              245Gross
                  Profit
              
              
              
              
              
              
              
              
              -
              
              
              8,731**EXPENSES**Advertising
                  and promotion
              
              
              
              
              
              -
              
              
              -
              
              
              121,892Amortization
                  of intangible assets
              
              
              
              
              
              -
              
              
              -
              
              
              7,125Consulting
                  fees**(Notes
                  6 and 7)**
              
              
              
              
              
              951,692
              
              
              117,104
              
              
              3,893,518Depreciation
              
              
              
              
              
              738
              
              
              1,052
              
              
              9,906Interest
                  and bank charges**(Note
                  8)**
              
              
              
              
              
              324,852
              
              
              21,339
              
              
              512,446Investor
                  relations
              
              
              
              
              
              41,990
              
              
              34,479
              
              
              173,469Management
                  fees**(Note
                  7)**
              
              
              
              
              
              118,194
              
              
              169,538
              
              
              2,323,538Office
              
              
              
              
              
              6,872
              
              
              8,794
              
              
              91,484Professional
                  fees**(Note
                  7)**
              
              
              
              
              
              18,585
              
              
              61,637
              
              
              819,820Compensatory
                  element of Stock
              
              
              
              
              
              1,797,833
              
              
              -
              
              
              2,560,698Rent
              
              
              
              
              
              8,772
              
              
              8,111
              
              
              83,668Research
                  and development**(Note
                  3)**
              
              
              
              
              
              -
              
              
              -
              
              
              1,743,593Travel
              
              
              
              
              
              8,359
              
              
              3,556
              
              
              47,183Impairment
                  of licensing rights (Note 3)
              
              
              
              
              
              -
              
              
              -
              
              
              182,874Vehicle
              
              
              
              
              
              2,911
              
              
              3,106
              
              
              28,702**TOTAL
                  EXPENSES**
              
              
              
              
              
              3,280,798
              
              
              428,716
              
              
              12,599,916**NET
                  LOSS FROM OPERATIONS**
              
              
              
              
              
              (3,280,798
              )
              
              (428,716
              )
              
              (12,591,185
              )**OTHER
                  INCOME**(**EXPENSES**)Foreign
                  exchange
              
              
              
              
              
              1,555
              
              
              (403
              )
              
              36,542Gain
                  (loss) on settlement of debts and issuance of shares (Notes 7 and
                  11)
              
              
              
              
              
              -
              
              
              -
              
              
              82,023**Other
                  Income (expenses)**
              
              
              
              
              
              1,555
              
              
              (403
              )
              
              118,565**NET
                  LOSS**
              
              
              
              
              $
              (3,279,243
              )
              $
              (429,119
              )
              $
              (12,472,620
              )**BASIC
                  NET LOSS PER SHARE**
              
              
              
              
              
              ($0.03
              )
              
              ($0.01
              )**WEIGHTED
                  AVERAGE NUMBER OF COMMON SHARES****OUTSTANDING**
              
              
              
              
              
              108,937,193
              
              
              51,931,000**NET
                  LOSS**
              
              
              
              
              $
              (3,279,243
              )
              $
              (429,119
              )Comprehensive
                  translation loss
              
              
              
              
              
              (3,262
              )
              
              -**Comprehensive
                  loss**
              
              
              
              
              $
              (3,282,505
              )
              $
              (429,119
              )See
                  Notes to Unaudited Condensed Consolidated Financial
                  Statements




5


**CHINA
                  HOLDINGS INC.****(a
                  development stage company)****CONDENSED
                  CONSOLIDATED STATEMENTS OF CASH FLOWS****(Unaudited)**For
                  the
              
              For
                  the
              
              Culmulative
                  results ofThree
                  Month
              
              Three
                  Month
              
              operations
                  fromEnded
              
              Ended
              
              April
                  3, 2002March
                  31
              
              March
                  31
              
              (Inception)2007
              
              2006
              
              to
                  March 31, 2007$
              
              
              $
              
              
              $**OPERATING
                  ACTIVITIES**Net
                  loss
              
              
              
              
              
              (3,279,243
              )
              
              (429,119
              )
              
              (12,472,620
              )Adjustments
                  to reconcile net loss to cash usedin
                  operating activities:Accrued
                  interest
              
              
              
              
              
              30,265
              
              
              20,069
              
              
              211,835Amortization
                  of intangible assets
              
              
              
              
              
              
              
              
              -
              
              
              7,125Compensatory
                  element of stock
              
              
              
              
              
              77,932
              
              
              -
              
              
              640,541Depreciation
              
              
              
              
              
              738
              
              
              1,052
              
              
              9,906Impairment
                  of licensing rights
              
              
              
              
              
              -
              
              
              -
              
              
              182,874License
                  rights
              
              
              
              
              
              -
              
              
              -
              
              
              1,359,999Loss
                  on settlement of debts and
              
              
              
              
              
              -
              
              
              -
              
              
              (90,524
              )issuance
                  of sharesNon
                  cash expenses paid with shares
              
              
              
              
              
              1,115,309
              
              
              121,151
              
              
              4,318,899Stock-based
                  compensation
              
              
              
              
              
              29,441
              
              
              156,412
              
              
              1,734,095Warrant
                  issued for compensation
              
              
              
              
              
              1,797,833
              
              
              -
              
              
              2,560,698Changes
                  in operating assets and liabilitiesPrepaid
                  expenses
              
              
              
              
              
              36,369
              
              
              (2,350
              )
              
              89,745Accounts
                  payable and accrued liabilities
              
              
              
              
              
              (938
              )
              
              (13,165
              )
              
              42,449Net
                  cash used in operating activities
              
              
              
              
              
              (192,294
              )
              
              (145,950
              )
              
              (1,404,978
              )**INVESTING
                  ACTIVITIES**Purchase
                  deposit for acquisition of companies
              
              
              
              
              
              -
              
              
              -
              
              
              (19,536
              )Net
                  cash used in investing activities
              
              
              
              
              
              -
              
              
              -
              
              
              (19,536
              )**FINANCING
                  ACTIVITIES**Proceeds
                  from issuance of common stock
              
              
              
              
              
              -
              
              
              -
              
              
              513,697Net
                  advances (repayment) from shareholders
              
              
              
              
              
              211,495
              
              
              159,457
              
              
              989,937Net
                  cash provided by financing activities
              
              
              
              
              
              211,495
              
              
              159,457
              
              
              1,503,634**EFFECT
                  OF EXCHANGE RATE CHANGES**
              
              
              
              
              
              (3,261
              )
              
              (14,380
              )
              
              (63,180
              )**NET****INCREASE
                  (DECREASE) IN CASH**
              
              
              
              
              
              15,940
              
              
              (873
              )
              
              15,940**CASH,
                  BEGINNING OF YEAR**
              
              
              
              
              
              -
              
              
              14,887
              
              
              -**CASH,
                  END OF YEAR PERIOD**
              
              
              
              
              
              15,940
              
              
              14,014
              
              
              15,940See
                  Notes to Unaudited Condensed Consolidated Financial
                  Statements




6





**CHINA
      HOLDINGS INC.**


**(a
      development ste company)**





NOTES
      TO
      CONDENSED CONSOLIDD FINANCIAL STATEMENTS


MARCH
      31,
      2007


(Unaudited)







**1.**  **NATURE
      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 months ended March 31, 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





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
      $774,322 and a stockholders’ deficit of $166,688 has incurred significant losses
      since inception and further losses are anticipated in the development of its
      products raising substantial doubt as to the Company's ability to continue
      as a
      going concern.





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


7





**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      2007


(Unaudited)




---

---






a)  Basis
      of
      presentation (continued)





Given
      the
      Company's limited operating history, lack of sales, and its operating losses,
      there can be no assurance that it will be able to achieve or maintain
      profitability. Accordingly, these factors raise substantial doubt about the
      Company’s ability to continue as a going concern.





b)  Consolidation




The
      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.








d)  Property
      and equipment





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





Computer
      - 30% declining balance


Furniture
      and fixtures - 20% declining balance





e)  Revenue
      recognition





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





f)  Net
      loss
      per common share





Basic
      loss per share includes no dilution and is computed by dividing income available
      to common stockholders by the weighted average number of common shares
      outstanding for the period. Dilutive loss per share reflects the potential
      dilution of securities that could share in the earnings of the Company. The
      accompanying presentation is only of basic loss per share as the potentially
      dilutive factors are anti-dilutive to basic loss per share.





8







**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      2007


(Unaudited)







**2.**  **SIGNIFICANT
      ACCOUNTING POLICIES - CONT’D**





g)  Fair
      value of financial instruments





In
      accordance with the requirements of SFAS No.107, **“** Disclosures
      about Fair Value of Financial Instruments”, the Company has determined the
      estimated fair value of financial instruments using available market information
      and appropriate valuation methodologies. The fair value of financial instruments
      classified as current assets or liabilities including cash, accounts payable
      and
      amounts due to shareholders, approximate carrying value due to the short-term
      maturity of the instruments.





h)  Intangible
      assets





The
      Company has adopted the provision of the Statement of Financial Accounting
      Standards (“SFAS”) No.142, “Goodwill and Intangible Assets”, which revises the
      accounting for purchased goodwill and intangible assets. Under SFAS No. 142,
      goodwill and intangible assets with indefinite lives are no longer amortized
      and
      are to be tested for impairment annually or whenever events or circumstances
      indicate that the estimated fair value is less than the related carrying value
      as determined on a reporting unit basis. The determination of any impairment
      would include a comparison of estimated future operating cash flows anticipated
      during the remaining life with the net carrying value of the asset as well
      as a
      comparison of the fair value to book value of the Company. Management has
      determined that the Company’s proprietary rights and formulas described in Note
      3 a) have indefinite lives and as such are not subject to amortization and
      further that no impairment of the carrying value of these intangible assets
      has
      occurred.





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





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





i)  Foreign
      currency translation





The
      Company’s functional currency is the Canadian dollar. The financial statements
      are translated to United States dollars in accordance with SFAS No. 52, “Foreign
      Currency Translation”, using period-end rates of exchange for assets and
      liabilities, and average rates of exchange for the year for revenues and
      expenses. Translation gains (losses) are recorded in accumulated other
      comprehensive income (loss) as a component of stockholders’ deficit. Gains and
      losses arising on translation or settlement of foreign currency denominated
      transactions or balances are included in the determination of income. Foreign
      currency transactions are primarily undertaken in Canadian dollars. The Company
      has not, to the date of these consolidated financials statements, entered into
      derivative instruments to offset the impact of foreign currency
      fluctuations.





9




**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      2007


(Unaudited)




---

**2.**  **SIGNIFICANT
      ACCOUNTING POLICIES - CONT’D**





j)  Income
      taxes





The
      Company follows SFAS
      No.
      109 ,
      “Accounting for Income Taxes”, using the
      liability method of accounting for income taxes. Under this method, deferred
      income tax assets and liabilities are recognized for the estimated tax
      consequences attributable to differences between the financial statement
      carrying values and their respective income tax basis (temporary differences).
      The effect on deferred income tax assets and liabilities of a change in tax
      rates is recognized in income in the period that includes the enactment date.
      At
      December 31, 2006, full deferred tax asset valuation allowance has been provided
      and no deferred tax asset benefit has been recorded.





k)  Stock-based
      compensation





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




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.




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




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
      objective of SFAS 157 is to increase consistency and comparability in fair
      value
      measurements and to expand disclosures about fair value measurements. SFAS
      157
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS 157 applies under other accounting pronouncements
      that
      require or permit fair value measurements and does not require any new fair
      value measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on the
      Company's future reported financial position or results of
      operations.




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


10




**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      2007


(Unaudited)




---

**2.**  **SIGNIFICANT
      ACCOUNTING POLICIES - CONT’D**


---



15,
      2006.
      The adoption of this statement is not expected to have a material effect on
      the
      Company's future reported financial position or results of
      operations.




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




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





11





**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      2007


(Unaudited)




**3.**  **INTANGIBLE
      ASSETS**


---



a)
            Asset
                purchase agreement





Pursuant
                to an asset purchase agreement dated May 1, 2004, the Company acquired
                from the Company’s President and a significant shareholder proprietary
                rights and formulas to the 26 natural herbal medicinal products that
                comprise the King of Herbs and Taoist Medicine product lines. In
                exchange
                for the proprietary rights and formulas to these products, the Company
                agreed to pay total consideration as
                follows:







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







The
      amount due to shareholders bears interest at 10% per annum, is unsecured and
      has
      no specific terms of repayment. In addition, the Company agreed to pay the
      vendors a combined total royalty equal to 5% of annual gross sales of the
      products until May 1, 2009.





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





b)
            Licensing
                rights agreement


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


12





**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      2007


(Unaudited)


**3.**  **INTANGIBLE
      ASSETS - CONT’D**





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.





b)  Licensing
      rights agreement - cont’d





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





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





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





13




**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      2007


(Unaudited)







---

**3.**  **INTANGIBLE
      ASSETS - CONT’D**





During
      2005, this licensing agreement was cancelled and the 760,000 shares issued
      in
      2004 are to be returned to the Company and cancelled.





c)  Asset
      purchase agreement





Pursuant
      to an asset purchase agreement dated March 22, 2005, the Company acquired from
      the Company’s shareholders intellectual rights to 108 “100% Natural Taoist
      Herbal Medicinal Products” that comprise the Company’s Taoist Medicine product
      lines. In exchange for the rights, the Company agreed to pay total consideration
      as follows:




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












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





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


14


**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      2007


(Unaudited)








**4.**  **PROPERTY
      AND EQUIPMENT**





Property
      and equipment consists of the following:





March
                31,
            
            December
                31,2007
            
            2006$
            
            $Computer
            
            $
            16,688
            
            $
            16,688Deposit
                for Acquisition of Company
            
            
            598,000
            
            
            -0-Furniture
                and Fixtures
            
            
            2,848
            
            
            2,849617,536
            
            
            19,537Less:
                accumulated depreciation
            
            
            (9,905
            )
            
            (9,168
            )$
            607,631
            
            $
            10,369




The Deposit for aquisition was paid for by the Company
      in
      stock in the first quarter.




---

**5.**  **DUE
      TO SHAREHOLDERS**





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


**6.**  **CAPITAL
      STOCK**







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





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





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







During
                the period ended March 31, 2007, the Company issued a total of 13,401,400
                common shares for services at an average of $0.061 per share for
                a total
                consideration of $816,509.





During
                the three month ended March 31, 2007 Company issued 4,980,000 common
                shares for finance cost at an average of $0.06 per share for a total
                consideration of $298,800







During
                the three month ended March 31, 2007 Company issued 5,200,000 common
                shares as acquisition cost at an average of $0.11 per share for a
                total
                consideration of $598,000




During
      the three month ended March 31, 2007 Company issued 5,000,000 common shares
      as
      loan repayment at an average price of $0.06 per share for a total consideration
      of $300,000




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




15


**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      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
            
            
            --
            
            
            --
            
            
            -Balance
                March 31, 2007
            
            
            12,729,175
            
            
            0.19
            
            
            2.22
                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 $68,856 was recorded as consulting
                expense till March 31,2007 and $43,025 as unamortized balance in
                deferred
                compensation as of March 31,2007. 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





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 $45,391 was recorded as consulting
                expense till March 31,2007and $66,062 as unamortized balance in deferred
                compensation as of March 31,2007. 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





16


**CHINA
      HOLDINGS INC.**


**(a
      development stage company)**





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
      31,
      2007





(Unaudited)







**6.**
            **CAPITAL
                STOCK - CONT’D**








d)
            On
                January 22, 2006, the Company granted 2,500,000 stock options to
                the
                President of the Company with an exercise price of $0.20 per share
                subject
                to immediate vesting. Stock-based compensation of $276,191 was recorded
                as
                consulting till March 31, 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 $105,002 was recorded as consulting
                expense till March 31,2007and $74,029 as unamortized balance in deferred
                compensation as of March 31, 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)
            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 $138,242 was recorded as consulting
                expense till March 31,2007and $98,389 as unamortized balance in deferred
                compensation as of March 31, 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 $16,430 was recorded as consulting
                expense till March 31,2007 and $4,312 as unamortized balance in deferred
                compensation as of March 31, 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





17


**CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 MARCH
        31,
        2007
 (Unaudited)
 
 **a.**
            **CAPITAL
                STOCK - CONT’D** 
 
 b)
            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 $2,061 was recorded as consulting expense till March
                31,2007 and $540 as unamortized balance in deferred compensation
                as of
                March 31, 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
 
 c)
            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 $1,560 was recorded as consulting expense till March
                31,2007 and $416 as unamortized balance in deferred compensation
                as of
                March 31, 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
 
 d)
            On
                May 1, 2006, the Company increased the exercise price of 250,000
                stock
                options granted to a consultant from $0.30 to $0.50 per share for
                125,000
                stock options and $1.00 per share for the remaining 125,000 stock
                options. 
 The
        Company has issued share purchase warrants as follows:
   **Number
                  of**
                **Warrants**
              
              **Weighted
                  Average****Exercise
                  Price**Balance,
                December 31, 2006
              
              
              31,750,000
              
              $
              0.15Issued
                during the period (vi,vii and
                viii)
              
              
              25,000,000
              
              
              0.17Expired
                during the period
              
              
              (100,000
              )
              
              0.15Balance,
                March 31, 2007
              
              
              56,650,000
              
              $
              0.16
 
  i)
            During
                2002, the Company issued 19,000 units at $0.10 per unit. Each unit
                consisted of one common share and one share purchase warrant. Each
                warrant
                entitles the holder to purchase an additional common share for $0.75
                and
                must be exercised within nine months of the date the Company's shares
                commence trading on a United States Stock exchange. These warrants
                were
                not exercised, and expired in full during fiscal 2005. 
 ii)
            During
                2003, the Company issued 100,000 units at $0.08 per unit. Each unit
                consisted of one common share and one share purchase warrant. Each
                warrant
                entitles the holder to purchase an additional common share for $0.11
                and
                must be exercised within two years of the date the Company's shares
                commence trading on a United States Stock
                exchange.   
 18
   **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 (Unaudited)
  
 **7.**
            **SUPPLEMENTARY
                NON-CASH INFORMATION** 
 
 iii)
            During
                2004, the Company issued 220,000 units at $0.25 per unit. Each unit
                consisted of one common share and one share purchase warrant. Each
                warrant
                entitles the holder to purchase an additional common share for $0.75
                and
                must be exercised within one year. These warrants were not exercised,
                and
                expired in full during fiscal 2005. 
 iv)
            During
                2005, the Company issued 1,080,000 units at $0.25 per unit. Each
                unit
                consisted of one common share and one share purchase warrant. Each
                warrant
                entitles the holder to purchase an additional common share for $0.75
                and
                must be exercised within one year of the date the Company's shares
                commence trading on a United States Stock exchange. These warrants
                were
                not exercised, and expired in full during fiscal the period ended
                September 30, 2006. 
 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.  
 The
        Company entered into the following non-cash transactions:
   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.   19
 
  j.
              On
                  December 30, 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 services for 2006.
 
 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.
  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.
  20
  
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 (Unaudited)
   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.
  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.
  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.
   21
  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.
  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.
   22
  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.
  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
                  June 16, 2006, the Company issued 250,000 common shares with a
                  fair value
                  of $0.105 per share for $26,250 of consulting
                  services.
  jjj.
              On
                  June 1, 2006, the Company issued 500,000 common shares with a fair
                  value
                  of $0.09 per share for $45,000 of consulting
                  services.
  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.
  nnn.
              On
                  April 12, 2006, the Company issued 150,000 common shares with a
                  fair value
                  of $0.105 per share for $15,750 of management consulting
                  services.
  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.
  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.
    23
  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)).
  cccc.
              During
                  the year ended December 31, 2005, the Company issued 534,875 common
                  shares
                  with fair values ranging from $0.20 to $0.24 for a total value
                  of $125,725
                  of which $50,725 was recorded as consulting expenses and $75,000
                  was
                  recorded as professional fees.
 
 **8.**
              **RELATED
                  PARTY TRANSACTIONS**
 
 The
        Company has entered into the following related party transactions:
 
 a)
            Recorded
                management and consulting fees to directors and shareholders totalling
                $118,194 (March 31, 2006 - $286,643); 
 b)
            Accrued
                interest expense to directors and shareholders totalling $30,265
                (March
                31, 2006 - $20,069); 
 24
   **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 (Unaudited)
 
  
 **9.**
              **COMMITMENTS**
 
 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 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 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. 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 pursuant
        to
        which Dr. Fan 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 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.
 
 
 25
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 (Unaudited)
 
  
 **9.**
              **COMMITMENTS
                  - continued**
 
 
 
 a)
            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. 
 b)
            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 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. 
 c)
            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. 
 e)
            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. 
 
 26
 
 
 
 **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 (Unaudited)
 
  
 **9.**
              **COMMITMENTS
                  - continued**
 
 
 f)
            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.  g)
            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.  h)
            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).  i)
            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.  j)
            On
                June 22, 2006, the Company entered into a letter of intent with Henan
                Furen Pharmaceuticals Group Co., Ltd. (“Furen”), China, for the proposed
                acquisition by the Company of 51% or more of Furen’s subsidiary Henan
                Furen Huaiqingtang Pharmaceuticals Co. Ltd. (“Huiaqingtang “) Pursuant to
                the Letter of Intent, the Company has first refusal rights and legal
                exclusive rights to acquire 51% or more of Furen for a period of
                nine
                months from the date of letter. On August 7, 2006, the Company entered
                into a definitive acquisition agreement with Furen and Huiaqingtang
                to
                acquire 60% of the outstanding stock of Huiaqingtang at an aggregate
                purchase price of $95,000,000 RMB, a portion of which shall be paid
                by the
                Company on or before the closing of the agreement and a portion to
                be paid
                three months after closing.  k)
            On
                June 16, 2006, the Company entered into an engagement agreement with
                a
                placement agent who will market the Company’s proposed debt/equity
                offering (the “Offering”) in consideration for 250,000 common shares
                (issued) and a cash fee equal to 10% of the gross proceeds of the
                Offering
                and warrants to purchase 10% of the total number of shares, or underlying
                shares to be purchased by the investor exercisable at a price equal
                to the
                purchase price or conversion price paid by the investor. The term
                of the
                agreement is one year.  l)
            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.  m)
            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.  n)
            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.  o)
            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.   27
  **CHINA
        HOLDINGS INC.**
 **(a
        development stage company)**
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 (Unaudited)
 
  
 **9.**
              **COMMITMENTS
                  - continued**
 
 p)
            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.  q)
            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.  r)
            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**
 
 A)
            On
                April 2, 2007 the Company granted 1,180,000 shares of common stock
                to a
                director and shareholder to extend current note and continue to fund
                company. 
 B)
        On
        April 2, 2007 the Company granted 100,000 shares of common stock to a consultant
        for legal fees
 
 28
 
  **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.
 
 
 **Critical
        Accounting Policies And Estimates**
 
 We
        have
        identified one policy area as critical to the understanding of our consolidated
        financial statements. The preparation of our consolidated financial statements
        requires management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets and
        liabilities at the date of the consolidated financial statements. In particular,
        management makes estimates concerning the valuation of stock based transactions.
        Stock based transactions include issuance of stock for services and for
        intangible assets such as technologies or licenses. Stock based transactions
        also include issuance of stock options and warrants for services and
        intangibles.
 
 We
        suggest that our significant accounting policies, as described in our
        consolidated financial statements in the Summary of Significant Accounting
        Policies, be read in conjunction with this Management's discussion and Analysis
        of Financial Condition and Results of Operations.
 
 **Background**
 
 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 Over the Counter Bulletin Board.
 
 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.
 
 China
        Holdings, Inc. is a development stage business that was formed in 2002 for
        the
        purpose of manufacturing, marketing and distributing proprietary natural
        medicinal products. We have had nominal revenues since our inception. We
        plan on
        developing a Taoist Medicine product line and a Vitamins and Supplements
        product
        line over the next twelve months. All of the products for the three product
        lines are fully developed and we expect to launch the Taoist Medicine and
        Vitamins and Supplements product lines within the next twelve months. All
        of our
        manufacturing 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 all of our current operations and sales
        are
        in Canada, we anticipate expanding our sales into the United States over
        the
        next six to twelve months and, thereafter, into regions of Europe and Asia.
  29
 **Operations
        Plans**
 
 Our
        goal
        is to launch our King of Herbs and Taoist Medicinal product lines and our
        Vitamins and Supplement product line over the next six to twelve months,
        provided that we are successful in raising at least $5 million of financing
        during the next three to six months. However, there can be no assurance that
        we
        will be able to obtain financing in sufficient amounts or on acceptable terms,
        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 significant
        dilution to existing shareholders and may involve securities that have rights,
        preferences, or privileges that are senior to our common stock.
   All
        of
        the products for our three product lines are fully developed. We currently
        outsource our manufacturing to third parties. We anticipate that we will
        generate revenues from sales of our herbal supplement products (1) through
        our
        corporate website, www.chinahealthholding.com and our e-commerce website,
        www.thechinahealth.com that we anticipate launching in early 2008, (2) through
        the establishment of third party retail and wholesale distribution agreements;
        and (3) through the establishment of company-owned retail stores and franchises
        in major cities in North America and the People's Republic of China. Our
        management will attempt to work to negotiate and enter into retail and wholesale
        distribution agreements for our products over the next six to twelve months.
        We
        will also attempt to open retail outlets in large cities in North America,
        Europe and the People's Republic of China over the next five years. We have
        not
        yet located any sites to establish retail stores, but are initially looking
        for
        locations in Beijing, Shanghai, Nanjing and Hong Kong in the People's Republic
        of China and New York, Los Angeles, San Francisco, Seattle, Las Vegas or
        other
        large cities in the United States. We anticipate that we will open our first
        retail storefront in the People's Republic of China and the United States
        within
        the next six to twelve months. We anticipate expanding and developing our
        operations and sales into the United States and the People's Republic of
        China,
        and thereafter, into regions of Europe and Asia as we continue to grow our
        business.
  In
        the
        next six to eighteen months, we intend to develop and establish our own
        worldwide distribution and marketing infrastructure as follows:
  Global
        E-Commerce: Management believes this is an immediate and low cost way to
        penetrate worldwide markets and enhance our brand recognition. Our e-commerce
        site will incorporate a wide variety of language, currency and payment options.
 
 Global
        Retail: We plan to establish flagship stores in key cities in North America,
        Europe and the Peoples Republic of China, including, New York, Toronto,
        Vancouver, London and Beijing.
  Global
        Franchise: Leveraged on our brands, we intend to open franchise models in
        each
        of our key target territories including North America, Peoples Republic of
        China
        and Europe.
  Global
        Distribution: We are in the process of negotiating with several distribution
        companies with a view to distributing our products with the objective of
        lowering the cost of distribution in certain territories.
  **RESULTS
        OF OPERATIONS**
 
 We
        had a
        net loss of $3,279,243 for the three months ended March 31, 2007 as compared
        to
        a net loss of $429,119 for the three months ended March 31, 2006. *The* increase ** in the
        net loss was a result of issuance of warrants issued for the reduction of
        debt
        and for services. For the three months ended March 31, 2007,
        we incurred an aggregate of $3,279,243 in expenses as compared to $429,119
        for
        the three months ended March 31, 2006. Expenses incurred during the three
        months
        ended March 31, 2007 consisted of $951,692 in consulting 
fees,  $118,194 in 
management  fees,  $18,585 in professional fees, $324,852 in
        interest and bank charges, $8,772 in rent, $8,359 in travel 
expenses,  $6,872 in office  expenses,  $41,990 in 
investor  relations costs, $738 in depreciation expenses, $0 in advertising
        and promotional expenses,$1,797,833 in stock based compensation  and $2,911
        of vehicle expenses.
 
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 As
        of
        March 31, 2007, we had cash of $15,939.  Our current liabilities as of
        March 31, 2007 aggregated $851,652.  As of March 31,
        2007, we had a working capital deficiency of $774,322and
        an accumulated deficit of $12,472,620. To date, our
        operations have been funded through advances from our Chief Executive Officer,
        Julianna Lu and through issuances of shares of our common stock.
  As
        of
        March 31, 2007, we had outstanding loans to our CEO, Julianna Lu, in the
        amount
        of $573,582, Vice President, XiaoFei Yu, in the amount of $212,197 and to
        James Simpson, one of the Company's consultant, in the amount of $31,128.
        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.
 
 30
 While
        we
        have raised capital to meet our working capital and financing needs in the
        past,
        additional financing is required within the next 12 months in order to meet
        our
        current and projected cash flow deficits from operations and development.
        We
        have sufficient funds to conduct our operations for several months, but not
        for
        12 months or more. Further, in order to expand our business, fund future
        development and begin marketing and selling our three products lines and
        pursue
        our acquisition strategy, we will need to raise at least $25 million over
        the
        next twelve to twenty-four months. There can be no assurance that financing
        will
        be available in amounts or on terms acceptable to us, if at all.
 
 By
        adjusting our operations and development to the level of capitalization,
        we
        believe we have sufficient capital resources to meet projected cash flow
        deficits. However, if during that period or thereafter, we are not successful
        in
        generating sufficient liquidity from operations or in raising sufficient
        capital
        resources, on terms acceptable to us, this could have a material adverse
        effect
        on our business, results of operations liquidity and financial condition.
 
 Our
        registered independent certified public accountants have stated in their
        report
        that we have incurred operating losses in the last two years, and that we
        are
        dependent upon management's ability to develop profitable operations. These
        factors among others may raise substantial doubt about our ability to continue
        as a going concern.
 
 We
        presently do not have any available credit, bank financing or other external
        sources of liquidity. Due to our brief history and historical operating losses,
        our operations have not been a source of liquidity. We will need to obtain
        additional capital in order to expand operations and become profitable. We
        intend to pursue the building of a re-seller network outside the United States,
        and if successful, the re-seller agreements would constitute a source of
        liquidity and capital over time. In order to obtain capital, we may need
        to sell
        additional shares of our common stock or borrow funds from private lenders.
        There can be no assurance that we will be successful in obtaining additional
        funding and execution of re-seller agreements outside the Unites States.
 
 We
        will
        still need additional investments in order to continue operations to cash
        flow
        break even. Additional investments are being sought, but we cannot guarantee
        that we will be able to obtain such investments. Financing transactions may
        include the issuance of equity or debt securities, obtaining credit facilities,
        or other financing mechanisms. However, the trading price of our common stock
        and the downturn in the U.S. stock and debt markets could make it more difficult
        to obtain financing through the issuance of equity or debt securities. Even
        if
        we are able to raise the funds required, it is possible that we could incur
        unexpected costs and expenses, fail to collect significant amounts owed to
        us,
        or experience unexpected cash requirements that would force us to seek
        alternative financing. Further, if we issue additional equity or debt
        securities, stockholders may experience additional dilution or the new equity
        securities may have rights, preferences or privileges senior to those of
        existing holders of our common stock. If additional financing is not available
        or is not available on acceptable terms, we will have to curtail our
        operations.
 
 **Overview**
  We
        are a
        development stage company, founded by our Chairman and Chief Executive Officer,
        Julianna Lu, in 2002 with the goal of becoming a leading manufacturer, marketer
        and distributor in the global natural medical and pharmaceutical industry.
        On
        April 3, 2002, we were incorporated under the laws of the State of Nevada
        under
        the name A E&E Pharma Corporation. On May 25, 2004, we changed our name to
        China Health Holding, Inc. On May
        1, 2007, we changed our name to China Holdings, Inc Our
        common stock traded on the OTC Bulletin Board under the symbol “CHHH” since
        April 18, 2005 and Effective May 11, 2007, trades under the symbol “CHHL” on the
        OTC Bulletin Board
  We
        intend
        to manufacture, market and distribute proprietary natural medicinal products.
        Our product lines include:
 1.  King
        of
        Herbs-based products;
 2.  Taoist
        Medicinal products; and
 3.  A
        line of
        natural multi-vitamins and supplements.
  All
        of
        our products are based on traditional Chinese medicine and the principals
        of
        Taoism. Taoist philosophy and Taoist medicinal healing practices have been
        incorporated into a broad spectrum of medical practices and treatments in
        the
        People's Republic of China. Traditional Chinese medicine practices have
        generally been labeled worldwide as "alternative medicine" or "holistic
        medicine" since they rely more on natural remedies versus chemical remedies
        and
        treatments.
  **PRODUCTS**
  We
        intend
        to manufacture, market and sell proprietary neutraceutical products.
        Neutraceuticals are products isolated or purified from plants or other foods
        that are sold in dosage form. These products are intended to provide certain
        physiological benefits and/or protection against chronic disease.
        Neutraceuticals are commonly referred to as "dietary supplements" or
        "nutritional supplements." Neutraceuticals are generally viewed as preventive
        supplements, as opposed to drugs, which are active chemical substances used
        to
        treat illnesses or symptoms of illnesses. Neutraceuticals represent an
        alternative approach to medicine, based on nutrition and the health or wellness
        of the entire body rather than treating the symptoms of a disease or illness.
        Since most of our products are considered to be dietary supplements, as opposed
        to pharmaceutical products or drugs, our existing product line is not subject
        to
        stringent clinical testing to which pharmaceutical products are subjected.
        All
        of our products are manufactured in accordance with Good Manufacturing Practices
        rules and standards.
  31
 We
        also
        plan to introduce a line of natural skin care and cosmetic products as well
        as
        to develop new products based on our knowledge of traditional Chinese medical
        practice.
  Our
        product lines are based on two key fundamentals - the healing power of King
        of
        Herbs and the thousands of years of history that forms the basis for traditional
        Chinese medicine and Taoist medicine.
   **KING
        OF HERBS PRODUCT LINE**
   King
        of
        Herbs is a term that we use to refer to the main proprietary herbal formulations
        that are essential to all of our products. The herbs that make up King of
        Herbs
        have been used in Chinese medicine to reinforce what is called the body's
        vital
        energy source, or qii. Qii is a Chinese medical term for the human body's
        energy. Our product line is intended to improve immune system and
        cardio-vascular system, and improve and increase energy and endurance levels,
        sexual function and the health and wellness of the entire body. We have
        developed proprietary formulations that target certain physiological conditions
        which we intend to market and sell to the public.
  ·
            VG-KING.
                A natural tonic for men's health, formulated specifically for the
                male
                genitor-urinary system. ·
            VG-QUEEN.
                A natural product for women's health, formulated specifically for
                the
                female reproductive system. ·
            VG-VITAL.
                This formula acts as a natural energy resource and anti-oxidant.
                This
                product also is marketed as an anti-fatigue and anti-aging agent
                and as a
                supplement to restore qii. ·
            VG-CARDIOVASCULAR.
                Designed to improve the function of the cardiovascular system, thereby
                improving overall health. ·
            VG-IMMUNE.
                Enhances the body's immune system. ·
            VG-BRAIN
                & MEMORY. Designed to increase blood flow to the brain and cerebral
                system to enhance memory and cerebral
                functions. ·
            VG-LIVER.
                Enhances liver function and protects it from damage from inflammation
                and
                oxidation. ·
            VG-LUNG.
                Designed to assist the functioning of the upper respiratory tract
                and
                lungs. This product also is marketed to increase respiratory ventilation
                for athletes. ·
            VG-LONGEVITY.
                A special formula for prolonging people's life by reducing the progress
                of
                aging. This product is designed to assist the body at multiple system
                levels, including the immune, nervous, cardiovascular and respiratory
                systems. ·
            VG-PANCREAS
                HEALTH. A special formula designed to promote healthy blood glucose
                levels. ·
            VG-HEALTH.
                A formula designed to help maintain a healthy immune
                system. ·
            VG-PROSTATE
                HEALTH. Designed to help ensure a healthy
                prostate. ·
            VG-WEIGHT
                CONTROL. Formulated to assist individuals with their weight loss
                goals.  **TAOIST
        MEDICINAL PRODUCT LINE**
  Taoist
        medicinal healing sciences have been incorporated into a broad spectrum of
        medical practices and treatments in the People's Republic of China and are
        collectively known as traditional Chinese medicine. From a global perspective,
        medical treatments are divided into two broad categories: western medicine
        and
        traditional Chinese medicine. In the United States and other western countries,
        traditional Chinese treatments have been labeled "alternative medicine" or
        "holistic medicine." The products in our Taoist Medicinal product line are
        considered to be dietary supplements. They are based on the principles of
        traditional Chinese medicine and Taoist healing sciences. Taoism is an ancient
        worldview that acknowledges the movement towards balance inherent in all
        things.
  ·
            VG-NRP
                (Nine Rare Pill). Formulated to enhance liver and kidney function
                and
                decrease lassitude in loin and knee. ·
            VG-MP
                (Motherwort Pill with Ten Precious Ingredients). Designed to enhance
                the
                tonifying qii and blood, enhance female regeneration functions and
                enhance
                the body's energy and endurance levels. ·
            VG-EPP
                (Decoction of Eight Precious Products for Refreshing). Designed to
                prevent
                restlessness. ·
            VG-PFI
                (Pill of Four Immortals). Designed to enhance kidney functions. ·
            VG-NWP
                (Nine-Wei Powder for Strengthening Yang). Primarily for men, this
                product
                is designed to nourish marrow and promote flow of kidney qii. ·
            VG-FKB
                (Five Kernel Bolus). Moistens the intestines. ·
            VG-LYZR
                (Bolus of Longyan Aril and Wild Jujube Seed). Enriches the blood,
                tranquilize the mind and tone the kidney. ·
            VG-ZMGQ
                (Bolus of Sesame Seed and Wolfberry Fruit). Designed to invigorate
                the
                liver and kidney. ·
            VG-HTZM
                (Bolus of Walnut and Sesame Seed). Designed to invigorate the liver,
                tone
                the kidney, promote healthy eyes and moisten the
                intestines. ·
            VG-LZFL
                (Cake of Lotus Seed and Poria). Designed to strengthen the spleen. 
 
 **108
        100% NATURAL TAIOIST HERBAL MEDICINAL PRODUCTS**
 1.
        Fanxie
        Jianfei Yin
 FUNCTIONS:
        Purgation, removing stagnancy, obesity treatment
 INDICATION:
        Adiposis
 
 32
 2.
        Qingshen Yishou Gao
 FUNCTIONS:
        Invigorating spleen and drying damp, obesity treatment, prolong
        life
 INDICATION:
        Adiposis with pathogenic damp
 
 3.
        Jianfei Yannian San
 FUNCTIONS:
        Soothing the liver and regulating qi, removing blood stasis and postponing
        senescence
 INDICATIONS:
        Adiposis, hyperlipaemia, arteriosclerosis
 
 4.
        Juhua
        Jueming Yin
 FUNCTIONS:
        Clearing heat and dispelling wind, calming liver-yang and purging
        liver-fire
 INDICATIONS:
        Hypertension, hyperlipaemia
 
 5.
        Juhua
        Jiangya San
 FUNCTIONS:
        Dispelling wind and clearing heat, lowering qi and soothing the
        liver
 INDICATIONS:
        Hypertension, senile wind-heat common cold in spring
 
 6.
        Ershi
        San
 FUNCTION:
        Dispelling wind and relieving exterior syndrome
 INDICATIONS:Common
        cold, fever with chilliness, sore-throat, tonsillitis
 
 7.
        Qingre
        Sigen Yin
 FUNCTIONS:
        Clearing heat and cooling blood, dispelling wind and activating
        collaterals
 INDICATIONS:
        Fever, hyperthermia with lethargy, distortion of the face with crooked mouth
        and
        eye due to theoplegia
 
 8.
        Chaihu
        Gegen Yin
 FUNCTION:
        Expelling pathogenic factors from muscles and superficies
 INDICATION:
        Wind-cold common cold
 
 9.
        Yazhicao Yin
 FUNCTION:
        Clearing heat and removing toxic substance
 INDICATION:
        Summer-heat common cold
 
 10.
        Huoxiang Baizhi Yin
 FUNCTIONS:
        Relieving exterior syndrome to resolve damp, invigorating spleen and regulating
        stomach
 INDICATION:
        Enterogastric common cold
 
 11.
        Yesu
        Tianwang San
 FUNCTIONS:
        Reconciling and expelling pathogenic factors from the superficies, clearing
        heat
        and dredging orifices
 INDICATIONS:
        Common cold, malaria, pulmonary tuberculosis, hectic fever
 
 12.
        Tulianqiao Yin
 FUNCTIONS:
        Clearing heat and removing toxic substance, relieving the exterior syndrome
        with
        drugs of pungent taste and cool nature, relieving cough
 INDICATIONS:
        Wind-heat common cold, pharyngodynia, abundant expectoration, cough
 
 13.
        Ziyang Feiyin Gao
 FUNCTION:
        Nourishing yin and lung
 INDICATION:
        Tussis due to deficiency of lung-yin
 
 14.
        Ermu
        San
 FUNCTIONS:
        Moisturizing lung and resolving sputum, clearing heat and relieving
        cough
 INDICATION:
        Tussis due to lung-heat
 
 15.
        Shixiantao Yin
 FUNCTION:
        Clearing lung-heat to relieve cough
 INDICATION:
        Cough with thin sputum
 
 16.
        Baibu
        Donghua San
 FUNCTIONS:
        Clearing lung-heat and lowering qi, eliminating sputum and relieving
        cough
 INDICATIONS:
        Acute and chronic tussis with wind-heat or wind-cold or wind-dryness syndrome,
        abundant expectoration or not
 
 33
 17.
        Xiangling Yin
 FUNCTION:
        Moisturizing lung to relieve cough
 INDICATIONS:
        Tussis due to lung-heat and lung-dryness, pulmonary tuberculosis
 
 18.
        Chuanbei Baiji San
 FUNCTIONS:
        Moisturizing lung and resolving sputum, clearing heat and relieving
        cough
 INDICATION:
        Hemoptysis due to tuberculosis
 
 19.
        Didan
        San
 FUNCTION:
        Purging fire and clearing heat
 INDICATIONS:
        Laryngopharyngitis, chorditis vocalis, asthma due to acute and chronic
        bronchitis
 
 20.
        Qingguteng San
 FUNCTION:
        Clearing heat and removing toxic substance
 INDICATIONS:
        Acute bronchitis, hyperthermia, pectoralgia
 
 21.
        Juhua
        Sangye Yin
 FUNCTION:
        Dispelling wind and heat, moisturizing lung to relieve cough
 INDICATION:
        Acute bronchitis
 
 22.
        Qiupi
        Mahuang Yin
 FUNCTIONS:
        Clearing heat and removing toxic substance, moisturizing lung to relieve
        cough
 INDICATION:
        Chronic bronchitis with abundant expectoration and cough
 
 23.
        Shuanghua Lianqiao Yin
 FUNCTIONS:
        Clearing heat and dissipating sputum, relieving cough and asthma
 INDICATION:
        Chronic bronchitis
 
 24.
        Sanren Gao
 FUNCTIONS:
        Lowering qi and relieving asthma, removing sputum and resolving
        stasis
 INDICATIONS:
        Senile chronic bronchitis, pulmonary emphysema
 
 25.
        Baitan Doukou Yin
 FUNCTIONS:
        Promoting blood circulation to remove blood stasis, dredging meridians and
        activating collaterals
 INDICATIONS:
        Coronary heart disease, angina pectoris
 
 26.
        Danshen Honghua Yin
 FUNCTIONS:
        Promoting blood circulation to remove blood stasis, dredging meridians and
        activating collaterals
 INDICATIONS:
        Coronary heart disease, angina pectoris
 
 27.
        Huangqi Sanqi Yin
 FUNCTIONS:
        Promoting blood circulation to remove blood stasis, dredging meridians and
        activating collaterals
 INDICATION:
        Coronary heart disease with hypertension
 
 28.
        Duzhong Danshen Jiu
 FUNCTIONS:
        Promoting blood circulation to remove blood stasis, dredging meridians and
        activating collaterals
 INDICATIONS:
        Senile and middle-aged wind-cold-damp arthralgia, numbness of limbs due to
        sluggishness qi and blood stasis, hemiparalysis due to cerebral thrombosis,
        coronary heart disease
 
 29.
        Huoxue Tongluo San
 FUNCTIONS:
        Promoting qi and blood circulation, dispersing wind and dredging meridian
 INDICATIONS:
        Theoplegia premonitory with
 extremity-numbness,
        theoplegia sequel with hemiparalysis
 
 30.
        Xianling Mugua Jiu
 FUNCTIONS:
        Warming kidney and reinforcing yang, eliminating damp and
 dispelling
        cold, analgesia
 INDICATIONS:
        Arthralgia, numbness of limbs, lassitude in loin and legs due to deficiency
        of
        spleen-yang and kidney-yang, sexual hypoesthesia, sexual impotence,
        sterility
 
 34
 31.
        Danggui Huoluo Jiu
 FUNCTIONS:
        Supplementing qi and nourishing blood, dispelling wind and removing damp,
        analgesia
 INDICATIONS:
        Lumbar muscle strain, scapulohumeral periarthritis, cervical spondylopathy,
        hemiparalysis due to cerebral thrombosis
 
 32.
        Baizhu Qufeng Jiu
 FUNCTIONS:
        Dispelling wind and removing damp, relaxing muscles and tendon, promoting
        blood
        circulation, reducing swelling and analgesia
 INDICATIONS:
        Rheumatic arthritis, rheumatoid arthritis, sciatica
 
 33.
        Qufeng Tongluo Jiu
 FUNCTIONS:
        Promoting qi and blood circulation, dispelling wind and dredging
        collaterals
 INDICATIONS:
        Rheumatic arthritis, rheumatoid arthritis, ischemic necrosis of femoral head
 
 34.
        Sanqi
        Huoxue Jiu
 FUNCTIONS:
        Promoting qi and blood circulation, dispelling wind and removing
        damp
 INDICATIONS:
        Arthrotrauma, stagnation of blood and swelling pain due to traumatic injury,
        arthritis
 
 35.
        Xuelian Huoxue Tongluo Yin
 FUNCTIONS:Clearing
        heat and eliminating damp, promoting blood circulation and dredging
        collaterals
 INDICATION:
        Rheumatic arthritis
 
 36.
        Wuweizigen Yin
 FUNCTION:
        Dispelling wind and removing damp
 INDICATION:
        Wind-cold or damp-heat arthralgia
 
 37.
        Xianteng Shuangjian Yin
 FUNCTIONS:
        Removing damp, resolving phlegm, dredging collaterals
 INDICATION:
        Scapulohumeral periarthritis due to stagnation of phlegm-damp
 
 38.
        Jiuhua Kangshuai Dan
 FUNCTIONS:
        Regulating five zang-organs and six fu-organs, postponing senescence and
        prolong
        life
 INDICATION:
        Senilism
 
 39.
        Fuling Yanshuai Wan
 FUNCTIONS:
        Invigorating spleen to eliminate damp, postponing senescence and prolong
        life
 INDICATIONS:
        Food retention, marasmus, senilism
 
 40.
        Baiyun Yanshou Dan
 FUNCTION:
        Supplementing stomach-qi and spleen-qi
 INDICATIONS:
        Chronic sympyom of digestive tract with anorexia, senilism
 
 41.
        Buqi
        Yangxue Gao
 FUNCTION:
        Invigorating qi and nourishing blood
 INDICATIONS:
        Marasmus, lassitude, emaciation, anorexia due to deficiency of qi and
        blood
 
 42.
        Jianpi Xiaoshi San
 FUNCTIONS:
        Regulating qi and blood, relieving dyspepsia
 INDICATIONS:
        Anorexia and dyspepsia due to deficiency of qi and blood
 
 43.
        Jiedu
        Yinyang San
 FUNCTION:
        Clearing heat and removing toxic substance
 INDICATION:
        stomatocace due to damp-heat toxic substance
 
 44.
        Qinghuo Xuanmen Dan
 FUNCTION:
        Nourishing yin and clearing fire
 INDICATION:
        Chronic stomatocace due to deficiency of spleen-stomach-yin and flaring-up
        of
        fire of deficiency type
 
 45.
        Wenwei San
 FUNCTION:
        Drying damp and warming stomach
 INDICATION:
        Stomach-ache due to stomach deficiency-cold syndrome
 
 35
 46.
        Zhiweihantong Fang
 FUNCTIONS:
        Warming stomachd, dispelling cold, analgesia
 INDICATIONS:
        Gastric ulcer, chronic gastritis, gastrospasm, stomach-ache
 due
        to
        stomach cold-syndrome
 
 47.
        Zhiweiretong Fang
 
 FUNCTIONS:
        Eliminating heat-accumulation, Promoting qi to relieve
 flatulence,
        analgesia
 INDICATIONS:
        Chronic gastritis due to Helicobacter pylori, gastric
 ulcer,
        stomach-ache due to accumulation of heat in intestine and stomach,
 abdominal
        distension and constipation
 
 48.
        Zhiqizhi Weitong Fang
 FUNCTIONS:
        Regulating qi and promoting blood circulation, relieving pain
 INDICATION:
        Stomach distention and stomach ache due to sluggishness of qi and stasis
        of
        blood
 
 49.
        Zhidanshizheng Yin
 FUNCTION:
        Eliminating gallstones
 INDICATION:
        Cholelithiasis
 
 50.
        Yujin
        Jianghuang Tang
 FUNCTIONS:
        Eliminating damp and heat, promoting liver and bile secretion
 INDICATIONS:
        Cholecystitis, inflammation of biliary tract
 
 51.
        Luxian Sheshe Yin
 FUNCTIONS:
        Nourishing liver, promoting diuresis
 INDICATION:
        Ascites due to cirrhosis of liver
 
 52.
        Didan
        Baogan Yin
 FUNCTIONS:
        Purging excess-fire of liver and bile, clearing excess-heat of
        sanjiao
 INDICATION:
        Cirrhosis of liver
 
 53.
        Mabian Yangpi Yin
 FUNCTION:
        Relieving flatulence, analgesia, removing stasis, dredging
        meridians
 INDICATIONS:
        splenomegaly, enlarged ovarian cyst
 
 54.
        Liniao Xiaozhong Yin
 FUNCTION:
        Promoting diuresis to reduce edema
 INDICATION:
        Hydropsy
 
 55.
        Tinglizi Xiaozhong Yin
 FUNCTIONS:
        Warming and invigorating heart-yang and kidney-yang, reducing edema
 INDICATION:
        Hydropsy
 
 56.
        Dongguaren Xiaozhong Yin
 FUNCTION:
        Promoting diuresis to reduce edema
 INDICATION:
        Hydropsy due to acute and chronic nephritis
 
 57.
        Sheshe Qingre Jiedu San
 FUNCTIONS:
        Clearing heat and removing toxic substance, promoting diuresis to reduce
        edema,
        promoting blood circulation to analgesia
 INDICATION:
        Early lung cancer
 
 58.
        Sheshe Hujiao San
 FUNCTION:
        Clearing heat and removing toxic substance
 INDICATION:
        Mammary cancer
 
 59.
        ShuiHuo Jiji Dan
 FUNCTIONS:
        Regulating five zang-organs, clearing heat and removing toxic
        substance
 INDICATIONS:
        Early stomach cancer, atrophic gastritis, five kinds of strain and seven
        kinds
        of impairments, consumptive disease
 
 36
 60.
        Shoushu Zihua Yin
 FUNCTION:
        Removing toxic substance
 INDICATIONS:
        Early carcinoma of esophagus, early carcinoma of cardia of stomach
 
 61.
        Kushi
        Muteng San
 FUNCTION:
        Removing toxic substance
 INDICATIONS:
        Early carcinoma of esophagus, Early stomach cancer
 
 62.
        Dangshen Sheshe Yin
 FUNCTIONS:
        Invigorating qi and blood, removing toxic substance
 INDICATION:
        Postoperative maintenance of late gastric cancer
 
 63.
        WuXing Yishou Dan
 FUNCTIONS:
        Invigorating qi and blood, regulating immunity, prolong life
 INDICATION:
        Tumor of digestive tract due to deficiency of qi-blood and yin-yang
 
 64.
        Xungu
        Cilao Yin
 FUNCTIONS:
        Removing toxic substance, nourishing liver, invigorating qi
 INDICATION:
        Early liver cancer
 
 65.
        Baidu
        Zhizhu Yin
 FUNCTIONS:
        Clearing heat and removing toxic substance, promoting qi to relieve dyspepsia,
        resolving mass and stagnation
 INDICATION:
        Early rectal cancer
 
 66.
        Dihuang Changshou Dan
 FUNCTION:
        Tonifying kidney and invigorating qi
 INDICATIONS:
        Diabetes, marasmus and thirst due to deficiency of kidney
 
 67.
        Erhuang Yannian San
 FUNCTIONS:
        Tonifying kidney-yin, replenishing essence and blood, strengthening
        qi
 INDICATION:
        Diabetes
 
 68.
        Meifa
        San
 FUNCTIONS:
        Nourishing kidney and brain, nourishing heart and hair
 INDICATION:
        Early graying of hair due to deficiency of blood
 
 69.
        Dihuang Meifa San
 FUNCTION:
        Nourishing kidney and hair
 INDICATION:
        Early graying of hair due to deficiency of kidney
 
 70.
        Huangjing Runfu Gao
 FUNCTION:
        Nourishing skin and prolong life
 
 71.
        Sanjing Meiyan Wan
 FUNCTIONS:
        Nourishing skin and prolong life, obesity treatment
 
 72.
        Yangyin Runbian San
 FUNCTIONS:
        Nourishing stomach-yin, lubricating bowel to relieve constipation, nourishing
        skin
 INDICATION:
        Constipation due to deficiency of stomach-yin and body fluid
 
 73.
        Pugong Shiwei Yin
 FUNCTION:Resolving
        damp and promoting diuresis
 INDICATION:
        Chronic prostatitis
 
 74.
        Yuanzhi Bujing Wan
 FUNCTIONS:
        Tonifying brain and kidney
 INDICATIONS:
        Sexual hypoesthesia, sexual impotence, sleeplessness, amnesia
 
 75.
        Fuling Huming Wan
 FUNCTION:
        Warming yang of heart and kidney
 INDICATION:
        Sexual impotence
 
 37
 76.
        Shanyao Bushen Wan
 FUNCTION:
        Nourishing kidney-essence
 INDICATIONS:
        Sexual hypoesthesia, sexual impotence due to deficiency of
        kidney-essence
 
 77.
        Zhiyangwei Wan
 FUNCTION:
        Nourishing kidney-essence
 INDICATION:
        Sexual impotence
 
 78.
        Shijining San
 FUNCTION:
        Nourishing kidney-essence
 INDICATION:
        Sexual impotence
 
 79.
        Zishen wan
 FUNCTIONS:
        Nourishing yin and invigorating yang, nourishing kidney-essence
 INDICATIONS:
        Sexual impotence, acyesis
 
 80.
        Yanshuai Dan
 FUNCTIONS:
        Nourishing kidney-essence, regulating immunity, postponing senescence, prolong
        life
 
 81.
        Yangxin Bushen Wan
 FUNCTIONS:
        Warming heart-yang, nourishing kidney-essence,
 INDICATIONS:
        Sexual impotence, phallocrypsis due to libertinism
 
 82.
        Xianren Huanshao Dan
 FUNCTIONS:
        Nourishing kidney-essence, postponing senescence, prolong life
 
 83.
        Yishou Dan
 FUNCTIONS:
        Nourishing heart and kidney, Nourishing skin, strengthen the bone and muscle,
        prolong life
 
 84.
        Yangshou Dan
 FUNCTIONS:
        Nourishing heart and kidney, Nourishing skin, replenishing bone marrow, prolong
        life
 
 85.
        Shenxian Yanshou Dan
 FUNCTIONS:
        Nourishing kidney-essence, invigorating heart-qi, postponing senescence,
        prolong
        life
 
 86.
        Zhibai Changshou Wan
 FUNCTIONS:
        Nourishing yin and invigorating yang, postponing senescence,prolong
        life
 
 87.
        Shouwu Changshou Dan
 FUNCTIONS:
        Nourishing kidney-essence, postponing senescence, prolong life
 INDICATIONS:
        Early graying of hair due to deficiency of kidney, Senilism
 
 88
        Baizi
        Changshou Dan
 FUNCTIONS:
        Nourishing heart and brain, postponing senescence, prolong life
 INDICATIONS:
        Senilism, hypomnesis
 
 89.
        Jusheng Changshou Dan
 FUNCTIONS:
        Invigorating yang and replenishing essence, nourishing brain and strengthen
        kidney, postponing senescence, prolong life
 INDICATIONS:
        Sexual impotence, premature ejaculation, hypomnesis, senilism
 
 90.
        Baijie Anshen Yin
 FUNCTION:
        Tranquilization
 INDICATION:
        Insomnia,
 
 91.
        Xinteng Anshen Yin
 FUNCTION:
        Tranquilization
 INDICATION:
        Insomnia
 
 92.
        Ruxiang Bibo San
 FUNCTION:
        Nourishing heart to calm the mind
 INDICATIONS:
        Neurasthenia, insomnia, amnesia
 
 38
 93.
        Baimu
        Yangjing Wan
 FUNCTION:
        Nourishing heart and brain, arresting seminal emission
 INDICATIONS:
        hypomnesis, insomnia and dreamful sleep
 
 94.
        Changpu Tongqiao Wan
 FUNCTION:
        Nourishing heart and brain, dredging orifices
 INDICATIONS:
        Memory loss, precursory symptom of senile dementia
 
 95.
        Fushen Chenxiang Wan
 FUNCTION:
        Nourishing yin and heart
 INDICATIONS:
        hypomnesis, insomnia and dreamful sleep due to deficiency of qi-yin of
        heart
 
 96.
        Bushen Anshen Yin
 FUNCTION:
        Tonifying kidney to relieve mental strain
 INDICATION:
        Insomnia due to deficiency of kidney
 
 97.
        Fushen Xiangfu Wan
 FUNCTIONS:
        Restoring normal coordination between the heart (fire) and the kidney (water),
        regulating yin and yang
 INDICATIONS:
        Palpitation due to terror, insomnia and amnesia
 
 98.
        Bunao
        Yangxin Wan
 FUNCTION:Nourishing
        heart and brain, tranquilization
 INDICATION:
        Mental strain
 
 99.
        Manjun Yizhi San
 FUNCTION:
        Nourishing heart to calm the mind, invigorating brain to reinforce
 INDICATION:
        Neurasthenic syndrome
 
 100.
        Yangxin Anshen Wan
 FUNCTION:
        Nourishing brain and relieving mental stress.
 INDICATIONS(pound)(0)hypomnesis,
        insomnia and dreamful sleep
 
 101.
        Wushen Yangxin Wan
 FUNCTIONS:
        Nourishing qi and yin, dredging meridians and promoting
        bloodcirculation
 INDICATIONS:
        (1) insomnia, dreamful sleep and amnesia due to qi-yin deficiency and blockage
        of meridian (2) arrhythmia, viral myocarditis, rheumatic
        myocarditis
 
 102.
        Qingxin Zishen Wan
 FUNCTION:
        Clearing heart-fire and nourishing kidney
 INDICATIONS:
        Hyperactivity of fire due to yin deficiency, night sweating, nocturnal emission
        due to libertinism
 
 103.
        Xinshen Jiji Wan
 FUNCTION:
        Restoring normal coordination between the heart(fire) and the
        kidney(water)
 INDICATIONS:
        Hypomnesis, insomnia and dreamful sleep due to kidney deficiency and upward
        flaming of heart-fire, seminal emission, sexual impotence, premature
        ejaculation
 
 104.
        Zishen Jianghuo Wan
 FUNCTION:
        Nourishing kidney-water and lowering heart-fire
 INDICATIONS:
        Hypomnesis, insomnia and dreamful sleep due to kidney deficiency and upward
        flaming of heart-fire, seminal emission, sexual impotence, premature
        ejaculation
 
 105.
        Songzhi Yangxin Dan
 FUNCTIONS:
        Nourishing brain and relieving mental stress, postponing
 senescence
        and prolong life
 
 106.
        Kaiqiao Ningshen Wan
 FUNCTION
        :Warming heart-yang, inducing resuscitation and eliminating damp, removing
        phlegm, tranquilization. INDICATION(pound)(0)Hypomnesis and neurasthenic
        due to
        deficiency of heart-yang, precursory symptom of senile dementia
 
 39
 107.
        Xiexia Tongbian Yin
 FUNCTION:
        Relieving constipation by purgation
 INDICATION:
        Habitual constipation
 
 108.
        Runbian Wan
 FUNCTION:
        Lubricating bowel to relieve constipation.
 INDICATION:
        Senile constipation
  
   **MULTI-VITAMINS
        AND SUPPLEMENTS**
   This
        product line will offer a full compliment of 100% natural multi-vitamins
        and
        multi-mineral food supplements. These products are intended to support the
        immune system, increase energy, provide stress relief, strengthen bones,
        enhance
        mental clarity and support relaxation and overall vitality.
  **Vitamin
                  A Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Beta-Carotene
              TAB.
                  90033-U
              *Antioxidant*
              10,000IU
              TabletsCod
                  Liver Oil
              SGL.
                  500062
              *A
                  rich source of Omega 3 fatty acids*
              20min
              SoftGelsCod
                  Liver Oil
              SGL.
                  50060
              *A
                  rich source of Omega 3 fatty acids*
              10min
              SoftGelsHalibut
                  Liver Oil
              SGL.
                  500064
              *A
                  rich source of Vitamins A & D*
              5000iu
                  A 400iu D
              SoftGels**Vitamin
                  B Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Folic
                  Acid
              TAB.
                  900021
              *An
                  essential prenatal nutrient.*
              1mg
              TabletsVitamin
                  B6
              TAB.
                  900027-U
              *Supports
                  energy & stress relief*
              100mg
              TabletsVitamin
                  B12
              
              
              250mcg
              TabletsVitamin
                  B Complex 50
              TAB.
                  900041-C
              *Supports
                  energy & stress relief*
              50mg
              TabletsVitamin
                  B-Complex 50 (TR)
              TAB.
                  900015-C
              *Supports
                  energy & stress relief*
              50mg
              TabletsB-Complex
                  with 300mg Vitamin C (TR)
              TAB.
                  90009-C
              *Supports
                  energy & stress relief*
              multi
              TabletsStress
                  B-Complex with 600mg Vitamin C
              TAB.
                  900013-C
              *Supports
                  energy & stress relief. Anti-Homocysteine*
              multi
              Tablets**Vitamin
                  C Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Vitamin
                  C
              TAB.
                  900035-C
              *Supports
                  immune system. Antioxidant*
              250mg
              TabletsVitamin
                  C
              TAB.
                  900029
              *Supports
                  immune system. Antioxidant*
              500mg
              TabletsVitamin
                  C
              TAB.
                  900047-C
              *Supports
                  immune system. Antioxidant*
              1000mg
              TabletsVitamin
                  C Chewable Orange
              TAB.
                  900017-U
              *Supports
                  immune system. Antioxidant*
              250mg
              TabletsVitamin
                  C Chewable Orange
              TAB.
                  900043-U
              *Supports
                  immune system. Antioxidant*
              500mg
              TabletsVitamin
                  C (TR)
              TAB.
                  900025-C
              *Supports
                  immune health*
              500mg
              TabletsVitamin
                  C (TR)
              TAB.
                  900019-C
              *Supports
                  immune health*
              1000mg
              TabletsVitamin
                  C with Rosehips
              TAB.
                  900039-C
              *Supports
                  immune health*
              500mg
              Tablets**Vitamin
                  E Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Vitamin
                  E Natural Source
              SGL.
                  500014
              *Nutritional
                  support for heart health*
              400IU
              SoftGelsVitamin
                  E Natural Source
              SGL.
                  500056
              *Nutritional
                  support for heart health*
              800IU
              SoftGelsVitamin
                  E Synthetic
              SGL.
                  50002
              *Nutritional
                  support for heart health*
              400IU
              SoftGelsVitamin
                  E Synthetic
              SGL.
                  500058
              *Nutritional
                  support for heart health*
              800IU
              SoftGels**AntiOxidant
                  Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**ACES
                  Formula
              N/A
              *Antioxidant*
              Multi
              TabletsCoEnzyme
                  Q10
              CAP.
                  800045
              *Nutritional
                  support for heart health Antioxidant*
              30
                  mg
              Capsules**Calcium
                  Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Calcium
                  (Carbonate)
              TAB.
                  900081-C
              *Promotes
                  strong bones*
              1500mg
              TabletsCalcium
                  (Carbonate) with Vitamin D
              TAB.
                  900007-C
              *Promotes
                  strong bones*
              1500mg
              TabletsNatural
                  Source Calcium (Carbonate)
              TAB.
                  900077-C
              *Promotes
                  strong bones*
              500mg
              TabletsNatural
                  Source Calcium (Carbonate) w/D
              TAB.
                  9000003-C
              *Promotes
                  strong bones*
              500mg
              Tablets
   40
  Natural
                  Source Calcium (Carbonate) w/D
              TAB.
                  9000003-C
              *Promotes
                  strong bones*
              500mg
              TabletsNatural
                  Source Calcium (Carbonate) w/D
              N/A
              *Promotes
                  strong bones*
              250mg
              TabletsCalcium
                  & Magnesium with Vitamin D
              TAB.
                  900057-C
              *Promotes
                  strong bones*
              333mg/166mg
              TabletsCalcium
                  Citrate w/D
              TAB.
                  900067-C
              *Promotes
                  strong bones*
              300mg
              TabletsVitamin
                  D
              TAB.
                  900105-U
              *Promotes
                  strong bones*
              1000iu
              TabletsVitamin
                  D
              TAB.
                  900103-U
              *Promotes
                  strong bones*
              400iu
              Tablets**Essential
                  Fatty Acid Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Evening
                  Primrose Oil
              SGL.
                  500026
              A
                  rich source of essential fatty acids
              500mg
              SoftGelEvening
                  Primrose Oil
              SGL.
                  500028
              *A
                  rich source of essential fatty acids*
              1000mg
              SoftGelFlaxseed
                  Oil (Organic)
              SGL.
                  500052
              *A
                  rich source of essential fatty acids*
              1000
                  mg
              SoftGelLecithin
                  (Unbleached)
              SGL.
                  500040
              *Support
                  for mental function*
              1200mg
              SoftGelOmega
                  3-6-9
              SGL.
                  500012
              *Nutritional
                  support for heart health Essential Fatty acids*
              1200mg
              SoftGelSalmon
                  Oil - Wild
              SGL.
                  500054
              *Nutritional
                  support for heart health Essential Fatty acids*
              1000mg
              SoftGel**Herbal
                  Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Cranberry
                  Extract 18:1
              CAP.
                  800041
              Nutritional
                  support for the urinary tract
              100mg
              CapsulesDevil's
                  Claw
              CAP.
                  800037
              *Herbal
                  support for joint health*
              500mg
              CapsulesEchinacea
                  (Purpurea Herb/Angustifolia Herb & Root)
              CAP.
                  800029
              *Herbal
                  support for the immune system*
              400mg
              CapsulesEchinacea
                  Extract 4%
              CAP.
                  800029
              *Herbal
                  support for the immune system*
              400mg
              CapsulesFeverfew
                  Extract 0.5%
              CAP.
                  800051
              *Herbal
                  support for migraine headaches*
              125mg
              CapsulesGarlic
                  Oil (Odour Free)
              SGL.
                  500048
              *Supports
                  immune health*
              500mg
              SoftGelsGarlic
                  Pure / Allicin-Rich
              CAP.
                  800055
              *Herbal
                  support for health, vitality & immunity*
              500mg
              Capsules
   41
  Ginkgo
                  Biloba 24/6
              CAP.
                  800033
              *Herbal
                  support for mental alertness*
              60mg
              CapsulesGinseng
                  (Panax) Root
              CAP.
                  800047
              *Herbal
                  support for energy & vitality*
              100mg
              CapsulesGrape
                  Seed Extract (MegaNatural Gold TM)
              CAP.
                  800035
              *A
                  rich source of antioxidants*
              50mg
              CapsulesMilk
                  Thistle Extract 80%
              CAP.
                  800043
              *Herbal
                  support for liver health*
              150mg
              CapsulesSaw
                  Palmetto
              SGL.
                  500050
              *Herbal
                  support to promote prostate health*
              160mg
              SoftGelsSt
                  John's Wort Extract 0.3%
              CAP.
                  800031
              *Herbal
                  support to promote relaxation*
              300mg
              Capsules**Joint
                  Support Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Glucosamine
                  Sulfate (Sodium Free)
              CAP.
                  800017
              *Nutritional
                  building blocks for joint health*
              500mg
              CapsulesGlucosamine
                  Sulfate (Sodium Free)
              CAP.
                  800017
              *Nutritional
                  building blocks for joint health*
              500mg
              CapsulesGlucosamine
                  Sulfate (Sodium Free)
              N/A
              *Nutritional
                  building blocks for joint health*
              1000mg
              CapsulesGlucosamine
                  (Sodium Free) & Chondroitin Sulfate
              CAP.
                  800039
              *Nutritional
                  building blocks for joint health*
              450mg
              CapsulesGlucosamine
                  (Sodium Free) & Chondroitin Sulfate
              CAP.
                  800115
              *Nutritional
                  building blocks for joint health*
              900mg
              CapsulesGlucosamine
                  (Sodium Free) & Chondroitin Sulfate
              CAP.
                  800115
              *Nutritional
                  building blocks for joint health*
              900mg
              CapsulesGlucosamine
                  Sulfate (Sodium Free) & OptiMSMTM
              CAP.
                  800053
              *Nutritional
                  building blocks for joint health*
              900mg
              CapsulesOptiMSMTMmethyl
                  sulfonyl methane
              CAP.
                  800049
              *Nutritional
                  support for joint health*
              500mg
              CapsulesOptiMSMTMmethyl
                  sulfonyl methane
              CAP.
                  800005
              *Nutritional
                  support for joint health*
              1000mg
              CapsulesShark
                  Cartilage
              CAP.
                  800057
              *Nutritional
                  building blocks for joint health*
              750mg
              Capsules**Mineral
                  Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Iron
                  (Ferrous gluconate)
              TAB.
                  900055-C
              *Nutritional
                  support for the prevention of anemia*
              300mg
              TabletsIron
                  (Ferrous sulphate)
              TAB.
                  900093-C
              *Nutritional
                  support for the prevention of anemia*
              300mg
              TabletsZinc
                  (Gluconate)
              TAB.
                  900037-C
              *Supports
                  immune health*
              50mg
              Tablets**Multi
                  Vitamin/Mineral Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Children's
                  Complete Chewable Multiple Vitamins & Minerals
              TAB.
                  90005-U
              *Provides
                  daily nutritional support*
              multi
              Tablets
    42
  Multiple
                  Vitamins
              TAB.
                  900031-C
              *Provides
                  daily nutritional support*
              multi
              TabletsMultiple
                  Vitamins plus Iron
              TAB.
                  900023-C
              *Provides
                  daily nutritional support*
              multi
              TabletsMulit
                  Vitamin & Mineral
              TAB.
                  900091-C
              *Provides
                  daily nutritional support*
              multi
              TabletsMultiple
                  Vitamins & Minerals 50 + w/Lutien
              TAB.
                  900109-C
              *Provides
                  daily nutritional support*
              multi
              TabletsMultivitamin
                  Forte w/Lutein (25 Multiple Vitamins & Minerals)
              TAB.
                  900113-C
              *Provides
                  daily nutritional support*
              multi
              TabletsPrenatal
                  Vitamin
              TAB.
                  900089-C
              *Provides
                  daily nutritional support*
              multi
              Tablets**Other
                  Products****Product**
              **Product
                  Number**
              **Slogan**
              **Activity**
              **Form**Phasoelamine
              
              
              500
                  mg
              TabletsPhasoelamine
              
              
              500
                  mg
              Tablets
  
 **RECENT
        DEVELOPMENTS**
 
 ***Acquisition
        Definitive Agreement with Beijing Boran Pharmaceuticals Co.
        Ltd.***
 
 On
        January 19, 2007, we entered into an Acquisition Definitive Agreement with
        Beijing Boran Pharmaceuticals Co. Ltd. pursuant to which we will acquire
        65% of
        the total issued and outstanding shares of Beijing Boran. In exchange for
        the
        shares of Beijin Boran we agreed to pay a consideration of USD $3,000,000.
        The
        consideration was determined based upon a total revenue of 32,000,000 RMB
        (approximately USD$4,118,000) 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 us
        in
        the event that upon the completion of audited financial statements of Bejing
        Boran, the revenue target of Beijing Boran is not met. The consideration
        shall
        be reduced as agreed upon by the parties. 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 each party, (ii) delivery of such
        certificates and closing documents as each party's counsel may request, (iii)
        the approval of 65% shareholders of Beijing Boran and (iv) for Beijing Boran
        has
        granted the Company exclusive first refusal rights until the closing date
        of the
        transaction.
 
 Beijing
        Boran was established in 2002 as a private pharmaceutical company in Beijing,
        PR
        China under Chinese Government Laws and Regulations. Beijing Boran engages
        in
        the businesses of developing, manufacturing and marketing various herbal-based
        pharmaceuticals drugs. Currently Beijing Boran has approximately260 employees.
        Beijing Boran owns China-SFDA certified GMP pharmaceutical drug manufacturing
        facilities, and a total of thirty-one (31) China -SFDA certifiedherbal-based
        pharmaceutical drugs. Beijing Boran owns two patents that were approved by
        PR
        China Government as Patents No.: CN1660403 and CN1833675A.Beijing Boran owns
        24,726 square meters lands in Beijing PR China. It also owns buildings occupying
        an additional 10,950 square meters. Beijing Boran also has12 new pharmaceutical
        drugs which are being processed for further China -SFDA approval as new
        pharmaceutical drugs and has a pending patent application.
  
 ***Memorandum
        of Understanding with Beijing Jifatang Chinese Medicine Research Institute
        and
        Beijing Jifatang Chinese Medicine Research & Development
        Institution***
 
 43
 On
        January 12, 2007, we entered into a binding Memorandum of Understanding 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 intellectual properties which BJCMRI and BJCMRDI may develop for
        a
        term of 10 years. As consideration for granting to us such first refusal
        and
        exclusive rights, we agreed to issue an aggregate of 200,000 restricted shares
        of its common stock to BJCMRI and BJCMRDI.
 
 The
        MOU
        contemplates that the parties will enter into acquisition agreements our
        acquisition of any rights to any new drugs developed by BJCMRI and BJCMRDI
        during the term of the MOU. The acquisition agreements will provide for such
        terms as the parties may agree and will be subject to our completion of
        satisfactory due diligence.
  
  ***Acquisition
        Definitive Agreement with Xi'An Meichen Pharmaceutical Co.
        Ltd.***
 
 On
        January 1, 2007, we executed an Acquisition Definitive Agreement with Xi'An
        Meichen Pharmaceutical Co. Ltd. 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, a total of 43 China- SFDA certified
        pharmaceutical drugs, and a total of 25 MU lands, which is approximately
        16,000
        square meters. In consideration for the Assets, we have 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, 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.
 
 Xi'An
        Meichen based in Shaanxi Province, PR China, is a drug manufacturer, developer
        and distributor with good manufacturing practices (GMP) certification from
        the
        China State Food and Drug Administration (China-SFDA). It manufactures and
        distributes a total of 43 China-SFDA certified herbal-based drugs and
        chemical-based drugs to China-SFDA Licensed Hospitals and drugstores across
        Shaanxi province and the People's Republic of China.
 
 ***Letter
        of Intent with with BeiJing Boran Pharmaceutical Co.,
        Ld.***
 
 On
        October 11, 2006, we executed a Letter of Intent with BeiJing Boran
        Pharmaceutical Co., Ld. ("BeiJing Boran") for the proposed acquisition by
        of 51%
        or more of BeiJing Boran. Pursuant to the letter of intent, both parties
        have
        expressed their intent and support for the cooperation and accomplishment
        of our
        acquisition of BeiJing Boran. Further, BeiJing Boran has agreed to offer
        us
        first refusal rights and legal exclusive rights for the acquisition of 51%
        or
        more of BeiJing Boran within nine months from the date of the Letter of Intent.
        BeiJing Boran has agreed to provide us with all necessary documentation and
        audited financial statements within 60 days, to enable us to commence our
        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.
 
 ***Acquisition
        Agreement with Henan Furen Huaiqingtang Pharmaceuticals Co.
        Ltd.***
 
 On
        August
        7, 2006 we entered into a Definitive Acquisition Agreement with Henan Furen
        Huaiqingtang Pharmaceuticals Co. Ltd. ("Henan Furen Co.") and Henan Furen
        Pharmaceutical Group Co. Ltd. and the shareholders of Henan Furen Co. Pursuant
        to the Agreement, we have agreed to acquire and the Sellers have agreed to
        sell,
        60% of the outstanding stock of Henan Furen Co. at an aggregate purchase
        price
        of $95,000,000 (RMB) a portion of which shall be paid on or before the closing
        of the Agreement and a portion to be paid three months after the Closing,
        upon
        the satisfaction of certain conditions.
 
 The
        parties have agreed to use their best efforts to complete the transactions
        contemplated by the Agreement within 60 business days from the execution
        of the
        Agreement. Prior to closing, however, all closing conditions, including,
        but not
        limited to, the completion of satisfactory legal and financial due diligence,
        as
        well as the delivery of stock certificates to us evidencing the ownership
        of the
        Sellers of the shares of Henan Furen Co. must be satisfied. The parties have
        further agreed to take all actions necessary to amend the Agreement to reflect
        their final agreement of the material terms.
 
 Henan
        Furen Co. is a China FDA certified GMP standards pharmaceutical drug
        manufacturer based in Zhengzhou PR China. Henan Furen Co. which has a total
        list
        of forty-six China-FDA certified pharmaceutical drugs that are distributed
        to
        China-FDA Licensed Hospitals and drugs stores across Henan province and across
        PR China.
 
 44
 ***Letter
        of Intent with Furen Pharmaceuticals Group Co., Ltd.***
 
 On
        June
        22, 2006, we entered into a Letter of Intent with Furen Pharmaceuticals Group
        Co., Ltd. for the proposed acquisition by the Company of 51% or more of Henan
        Furen Huaiqingtang Pharmaceuticals Co. Ltd., the wholly owned subsidiary
        of
        Furen Pharmaceuticals Group Co., Ltd. Pursuant to the letter of intent, both
        parties have expressed their intent and support for the cooperation and
        accomplishment of the acquisition of Henan Furen Huaiqingtang Pharmaceuticals
        Co. Ltd., by the Company. Further, Furen Pharmaceuticals Group Co., Ltd.
        has
        agreed to offer the Company first refusal rights and legal exclusive rights
        for
        the acquisition of 51% or more of Henan Furen Huaiqingtang Pharmaceuticals
        Co.
        Ltd. within nine months from the date of the Letter of Intent. Furen
        Pharmaceuticals Group Co., Ltd. has agreed to provide us with all necessary
        documentation and audited financial statements for us to commence our due
        diligence review. The completion of the acquisition is subject to the
        negotiation and execution of a definitive acquisition agreement, as well
        as to
        the completion of full legal and financial due diligence, including the
        determination of the valuation of Henan Furen Huaiqingtang Pharmaceuticals
        Co.
        Ltd.
 
 ***Letter
        of Intent with Henan Tiankang Pharmaceuticals Ltd.***
 
 On
        April
        16, 2006, we entered into a Letter of Intent with Henan Tiankang Pharmaceuticals
        Ltd. for the proposed acquisition by the Company of 51% or more of Henan
        Tiankang Pharmaceuticals Ltd. Pursuant to the letter of intent, both parties
        have expressed their intent and support for the cooperation and accomplishment
        of the acquisition and merger of Henan Tiankang Pharmaceuticals Ltd. by the
        Company. Further, Henan Tiankang Pharmaceuticals Ltd. has agreed to offer
        the
        Company with first refusal rights and legal exclusive rights for further
        acquisition of 51% or more of Henan Tiankang Pharmaceuticals Ltd. in the
        next 9
        months from the date of the signed Letter of Intent. The completion of the
        acquisition is subject to the negotiation and execution of a definitive
        acquisition agreement, as well as to the completion of full legal and financial
        due diligence, including the determination of the valuation of Henan Tiankang
        Pharmaceuticals Ltd., and the completion and delivery of audited financial
        statements of Henan Tiankang Pharmaceuticals Ltd.
 
 Henan
        Tiankang Pharmaceuticals Ltd., which was established under the laws of the
        Peoples Republic of China and is based in Henan, China, is a pharmaceutical
        manufacturer and research and development company that has been GMP certified
        (in 2004) by the Peoples Republic of China State Drug Administrative Department.
        Henan Tiankang Pharmaceuticals Ltd. was established in 2002 following the
        restructuring of Henan XinYuan Pharmaceuticals, which had 40 years of operating
        history and accomplishments in the Peoples Republic of China. Henan Tiankang
        Pharmaceuticals Ltd. also acquired Henen XinLuei Pharmaceuticals (formerly
        known
        as Henan Guishanshencao Pharmaceuticals) in 2005.
 
 ***Letter
        of Intent with Shaanxi WanAn Pharmaceutical Co. Ltd.***
 
 On
        February 19, 2006, we entered into a Letter of Intent, effective as of February
        28, 2006, with Shaanxi WanAn Pharmaceutical Co. Ltd. for the proposed
        acquisition by us of 51% or more of Shaanxi WanAn Pharmaceutical Co. Ltd.
        Pursuant to the letter of intent, Shaanxi WanAn Pharmaceutical Co. Ltd. has
        agreed to offer us first refusal rights and legal exclusive rights for the
        further acquisition of 51% or more Shaanxi WanAn Pharmaceutical Co. Ltd.
        in the
        next 12 months. The completion of the acquisition is subject to the negotiation
        and execution of a definitive acquisition agreement, as well as to the
        completion of full legal and financial due diligence, including the
        determination of the valuation of Shaanxi WanAn Pharmaceutical Co. Ltd.,
        and the
        completion and delivery of audited financial statements of Shaanxi WanAn
        Pharmaceutical Co. Ltd. Shaanxi Wanan Pharmaceutical Co., is a P.R. China
        State
        Drug Administrative Certified ISO13485 (1996) and ISO9001 (2000) pharmaceutical
        manufacturer and research & development company, based in Xian, Shaanxi,
        China.
 
 ***Letter
        of Intent with WangJing Hospital and WangJing Hospital of China Academy of
        Chinese Medical Sciences***
 
 On
        January 16, 2006, we entered into a Letter of Intent, effective as of January
        27, 2006, with WangJing Hospital and WangJing Hospital of China Academy of
        Chinese Medical Sciences, for the worldwide development of the China
        International University of Traditional Chinese Medicine and the University
        Hospital for Traditional Chinese Medical Sciences (the "Project"). WangJing
        Hospital and WangJing Hospital of China Academy of Chinese Medical Sciences
        consist of the Affiliated Hospital of Beijing College of Acupuncture and
        Orthopedics, the Orthopedic Department of Beijing College of Acupuncture
        and
        Orthopedics and the Institute of Orthopedics and Traumatology of China Academy
        of Traditional Chinese Medical Sciences.
 
 Pursuant
        to the Letter of Intent, the parties agreed to pursue the co-development
        of the
        China International University of Traditional Chinese Medicine and the
        University Hospital for Traditional Chinese Medical Sciences on a worldwide
        basis during the five year period following execution of the Letter of Intent.
        Further, WangJing Hospital and WangJing Hospital of China Academy of Chinese
        Medical Sciences have agreed to provide us with full intellectual and scientific
        and medical and technical support for further development of the Project,
        while
        we agreed to be responsible for further investment capital and business
        development for the Project.
 
 ***Definitive
        Acquisition Agreement with Shaanxi Meichen Pharmaceuticals Co.
        Ltd***
 
 45
 On
        September 3 and September 7, 2006, we executed a Definitive Acquisition
        Agreement with Shaanxi Meichen Pharmaceuticals Co. Ltd ("SMCP"), Ms. Chen
        Meiying, President/CEO, and the shareholders of SMCP. Pursuant to the Agreement,
        we have agreed to acquire and the Sellers have agreed to sell, 100% of the
        issued and outstanding stock of SMCP at an aggregate purchase price of
        $24,800,000 (RMB). The purchase price is payable as follows: (i) 80% of the
        purchase price payable in shares of our common stock, based on the average
        closing price of our common stock, as reported on the OTCBB for the five
        (5) day
        period prior to the closing date of the acquisition transaction; and (ii)
        20% of
        the purchase price payable in cash within 30 days after the closing of the
        transaction.
 
 The
        parties have agreed to use their best efforts to complete the transactions
        contemplated by the Agreement within 30 business days from the execution
        of the
        Agreement. Prior to closing, however, all closing conditions, including,
        but not
        limited to, the completion of satisfactory legal and financial due diligence,
        as
        well as the delivery of stock certificates to the Company evidencing the
        ownership of the Sellers of the shares of SMCP must be satisfied.
 
 Shannxi
        Meichen Pharmaceuticals, Ltd. is certified as a GMP Pharmaceutical Manufacturer
        by the Peoples Republic of China State Drug Administrative Agency. Shannxi
        Meichen Pharmaceuticals, Ltd. produces 69 different categories of pharmaceutical
        products, including, large capacity injection tablet, hard gelatin capsule,
        soft
        capsule, palletized granule for electric motor, tincture and eye drops and
        owns
        approximately 25 pharmaceutical drugs/products from the Peoples Republic
        of
        China State Drug Administrative Agency. Shannxi Meichen Pharmaceuticals Ltd.
        has
        been awarded the title of Good Product at the Municipal Level, Good Product
        and
        Famous Brand Product at Municipal Level in the PR of China. In addition,
        its
        large volume injection and small volume injection products have been awarded
        the
        GMP certificate by the Peoples Republic of China State Drug Administrative
        Agency. Shannxi Meichen Pharmaceuticals Ltd. is the surviving entity from
        the
        restructuring of Shannxi Meichen Bioscientific, Stock Co. Ltd. and Xianang
        Third
        Pharmaceutical Factory in January 2003.
 
 The
        Company had previously entered into a Letter of Intent with Xi'an Chunhui
        Pharmaceuticals Co. Ltd. but has determined not to proceed with this
        acquisition.
 
 **Future
        Development**
 
 We
        expect
        to focus our resources over the next six to twenty four months on expanding
        the
        scope of our three product lines, and expanding our business operations into
        the
        People's Republic of China, the United States and Europe. To expand our
        operations and business, we are implementing and developing our worldwide
        marketing and distribution strategy and infrastructures for our products
        and
        business development, and we are developing and implementing our worldwide
        e-commerce infrastructure, including our e-commerce website at
        www.thechinahealth.com. Our worldwide e-commerce website will have
        multi-language and multi-currency capabilities. Our worldwide e-commerce
        infrastructure is expected to also include media advertising and distribution
        agreements in multiple countries.
 
 We
        are
        developing a proprietary enhanced Global Retail and Franchise Infrastructure
        and
        System to support the launch of our global retail and franchising operations.
        The System is expected to be fully operational in about twenty four months.
        The
        new Global Retail Infrastructure will enable our employees to perform global
        customer maintenance, process account payments and view a customer's sales
        history.
  As
        we
        attempt to grow, we intend to establish regional sales teams in the United
        States and ultimately internationally. These sales teams will work with
        distributors and retailers in their regions to promote and sell our products.
        Also, together with marketing and sales consultants we will attempt to develop
        a
        marketing plan to promote our brand name and product lines worldwide. Currently,
        we do not have any agreements with retail or wholesale distributors. Our
        management will attempt to work to negotiate and enter into retail and wholesale
        distribution agreements for our products over the next six to twelve months.
        We
        will also attempt to open retail outlets in large cities in North America,
        Europe and the People's Republic of China over the next five years. We have
        not
        yet located any sites to establish retail stores, but are initially looking
        for
        locations in New York, Los Angeles, San Francisco, Seattle, Las Vegas or
        other
        large cities in the United States. We anticipate that we will open our first
        retail storefront in the United States within the next six to twelve
        months.
  We
        are in
        the process of identifying merger and/or acquisitions candidates in the Peoples
        Republic of China and worldwide as part of our growth plan to secure a strong
        future. Our acquisition strategy highlights our updated growth strategy to
        accrete value to our shareholders through the strategic combination of assets
        and net income and natural medicinal products and technologies and established
        China market with major natural medical companies and pharmaceutical companies
        in China and throughout the world. Growth by acquisition is an important
        component of our updated business model. As the Chinese government policy
        continues to change and move towards privatization of businesses, our focus
        on
        the emerging opportunities in China will primarily focus on small and
        medium-sized enterprises. Management believes that our growth strategy will
        enable the company to secure a strong future and a powerful position in the
        global natural medicinal industry and pharmaceutical industry.
  If
        we are
        successful in raising $5 million of financing in order to expand our business
        and fund future development, we anticipate the following expenses over the
        next
        twelve months: (a) $150,000 to develop our Internet website and e-commerce
        system; (b) $150,000 for media advertising to promote our brand name; (c)
        $200,000 for our research and development program; (d) $2,000,000 to establish
        our first retail outlet in the United States, including an integrated inventory
        management/ manufacturing/sales computer system; (e) $200,000 for an investor
        relations program; (f) $500,000 for professional and consultant fees; and
        (g)
        $1,800,000 for general working capital, including product development,
        inventory, and general and administrative expenses. We do not expect to purchase
        or sell significant equipment or to significantly increase the number of
        our
        employees over the next twelve months.
  46
 If
        we are
        only successful in raising $1 million of financing to sustain our current
        level
        of business operations, we anticipate the following expenses over the next
        twelve months: (a) $20,000 to develop our Internet website and e-commerce
        system; (b) $200,000 for media advertising to promote our brand name; (c)
        $60,000 for our research and development program; (d) $250,000-$400,000 to
        begin
        the process of establishing our first retail outlet in the United States;
        (e)
        $50,000 for an investor relations program; (f) $150,000-$250,000 for
        professional and consultant fees; and (g) $200,000-$300,000 for general working
        capital, including product development, inventory, and general and
        administrative expenses. We do not expect to purchase or sell significant
        equipment or to significantly increase the number of our employees over the
        next
        twelve months.
 
 *Acquisition
        of Plant and Equipment and Other Assets*
 
 We
        do not
        anticipate the sale of any material property, plant or equipment during the
        next
        12 months. We do not anticipate the acquisition of any material property,
        plant
        or equipment during the next 12 months.
 
 *Number
        of Employees*
 
 From
        our
        inception through the period ended March 31,2007, we have principally relied
        on
        the services of outside consultants and part-time employees for services.
        We
        currently have four (4) full time employees and 30 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.
 
 **Research
        and Development**
  We
        expect
        to pay approximately $200,000 over the next six months to scientific consultants
        in the People's Republic of China to identify and work with new product
        candidates held by third parties that we will ultimately attempt to acquire
        the
        rights to. Each of the formulations would be considered by the FDA to be
        unapproved new drugs and will require approval by the FDA or foreign regulators
        before we can sell them. If approval of such products by the FDA or foreign
        regulators is delayed or cannot be obtained, we will be forced to delay our
        plans to market and sell these products. Any delay could adversely affect
        our
        operations.
   As
        part
        of our growth strategy, we are currently in negotiations with respect to
        a
        number of product candidates that we intend to license or acquire for
        development and commercialization although no formal agreements with respect
        to
        any such proposed products have been entered into. Proposing, negotiating
        and
        implementing an economically viable product acquisition or license is a lengthy
        and complex process. Other companies, including those with substantially
        greater
        financial, marketing and sales resources, may compete with us for the
        acquisition or license of product candidates. We may not be able to acquire
        or
        license the rights to additional product candidates on terms that we find
        acceptable, or at all. If we are successful acquiring such product candidates,
        we will be required to raise additional capital for research and development,
        regulatory review and marketing efforts associated with such products. This
        will
        require substantial investment before our new product candidates could provide
        us with any revenue. We intend to seek outside debt and equity financing,
        to the
        extent that such funding is available under reasonable terms and conditions,
        in
        order to fund our research and development efforts. We have not yet sought
        any
        commitments for such financing and no assurance can be given that additional
        financing will be available, or if available, will be on acceptable terms.
  We
        also
        plan to add VG-ALLERGY, VG-EYE and VG-ANTI-TUMOR to the products in our King
        of
        Herbs product line. We acquired the rights to each of these products under
        a
        purchase agreement dated May 1, 2004 with Julianna Lu, our founder and principal
        executive officer, and Xiao Fei Yu, our President and one of our directors.
        VG-ALLERGY is a product designed to reduce allergic reactions of the human
        body.
        VG-EYE is formulated to prevent deterioration of eyesight. VG-ANTI-TUMOR
        is
        formulated specifically to prevent cancerous growths for cancer patients
        who are
        undergoing chemotherapy treatment. Each of these products would be considered
        an
        unapproved new drug by the FDA and will require an approved New Drug Application
        before the products can be marketed in the United States. No clinical trials
        have been conducted for these products. The New Drug Application process
        is
        expensive, lengthy and rigorous requiring extensive nonclinical and clinical
        trials to be successfully conducted. We intend to seek outside debt and equity
        financing, to the extent that such funding is available under reasonable
        terms
        and conditions, in order to fund this process. We have not yet sought any
        commitments for such financing and no assurance can be given that additional
        financing will be available, or if available, will be on acceptable terms.
        Additionally, there is no guarantee that the FDA would accept the data or
        approve any New Drug Applications for these products. If approval of these
        products by the FDA or foreign regulators is delayed or cannot be obtained,
        we
        will be forced to delay our plans to market and sell these products to
        consumers.
  **Recently
        issued accounting pronouncements**
 
 47
 SFAS
        No.
        159. In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities.” SFAS 159 permits entities to choose
        to measure many financial instruments, and certain other items, at fair value.
        SFAS 159 applies to reporting periods beginning after November 15, 2007.
        The
        adoption of SFAS 159 is not expected to have a material impact on the Company's
        financial condition or results of operations.
 
 In
        September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
        Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
        No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the
        overfunded or underfunded status of a defined benefit postretirement plan
        (other
        than a multiemployer plan) as an asset or liability in its statement of
        financial position and to recognize changes in that funded status in the
        year in
        which the changes occur through comprehensive income of a business entity
        or
        changes in unrestricted net assets of a not-for-profit organization. This
        statement also requires an employer to measure the funded status of a plan
        as of
        the date of its year-end statement of financial position, with limited
        exceptions. The provisions of SFAS No. 158 are effective for employers with
        publicly traded equity securities as of the end of the fiscal year ending
        after
        December 15, 2006. The adoption of this statement is not expected to have
        a
        material effect on the Company's future reported financial position or results
        of operations.
 
 In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
        objective of SFAS 157 is to increase consistency and comparability in fair
        value
        measurements and to expand disclosures about fair value measurements. SFAS
        157
        defines fair value, establishes a framework for measuring fair value in
        generally accepted accounting principles, and expands disclosures about fair
        value measurements. SFAS 157 applies under other accounting pronouncements
        that
        require or permit fair value measurements and does not require any new fair
        value measurements. The provisions of SFAS No. 157 are effective for fair
        value
        measurements made in fiscal years beginning after November 15, 2007. The
        adoption of this statement is not expected to have a material effect on the
        Company's future reported financial position or results of
        operations.
 
 In
        June
        2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
        No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB
        Statements No. 109”. FIN 48 clarifies the accounting for uncertainty in income
        taxes by prescribing a two-step method of first evaluating whether a tax
        position has met a more likely than not recognition threshold and second,
        measuring that tax position to determine the amount of benefit to be recognized
        in the financial statements. FIN 48 provides guidance on the presentation
        of
        such positions within a classified statement of financial position as well
        as on
        derecognition, interest and penalties, accounting in interim periods,
        disclosure, and transition. FIN 48 is effective for fiscal years beginning
        after
        December 15, 2006. The adoption of this statement is not expected to have
        a
        material effect on the Company's future reported financial position or results
        of operations.
 
 In
        March
        2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
        Financial Assets, an amendment of FASB Statement No. 140, Accounting for
        Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities". This statement requires all separately recognized servicing
        assets and servicing liabilities be initially measured at fair value, if
        practicable, and permits for subsequent measurement using either fair value
        measurement with changes in fair value reflected in earnings or the amortization
        and impairment requirements of Statement No. 140. The subsequent measurement
        of
        separately recognized servicing assets and servicing liabilities at fair
        value
        eliminates the necessity for entities that manage the risks inherent in
        servicing assets and servicing liabilities with derivatives to qualify for
        hedge
        accounting treatment and eliminates the characterization of declines in fair
        value as impairments or direct write-downs. SFAS No. 156 is effective
        for an entity's first fiscal year beginning after September 15,
        2006.  This adoption of this statement is not expected to have a
        significant effect on the Company’s future reported financial position or
        results of operations.
  In
        February 2007, the FASB issued SFAS No. 159,  "The Fair Value Option
        for Financial Assets and Financial Liabilities." SFAS 159 permits entities
        to
        choose to measure many financial instruments, and certain other items, at
        fair
        value. SFAS 159 applies to reporting periods beginning after November 15,
        2007.
        The adoption of SFAS 159 is not expected to have a material impact on the
        Company's financial condition or results of
        operations.
 
 In
        February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
        Financial Instruments-an amendment of FASB Statements No. 133 and 140”, to
        simplify and make more consistent the accounting for certain financial
        instruments. SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative
        Instruments and Hedging Activities”, to permit fair value remeasurement for any
        hybrid financial instrument with an embedded derivative that otherwise would
        require bifurcation, provided that the whole instrument is accounted for
        on a
        fair value basis. SFAS No. 155 amends SFAS No. 140, “Accounting for the
        Impairment or Disposal of Long-Lived Assets”, to allow a qualifying
        special-purpose entity to hold a derivative financial instrument that pertains
        to a beneficial interest other than another derivative financial instrument.
        SFAS No. 155 applies to all financial instruments acquired or issued after
        the
        beginning of an entity's first fiscal year that begins after September 15,
        2006,
        with earlier application allowed. This standard is not expected to have a
        significant effect on the Company’s future reported financial position or
        results of operations.
  **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**
  48
  **Our
        Financial Status Creates Doubt Whether We Will Continue As A Going Concern.**
  We
        reported net losses totaling of $3,279,243, and $429,119 March 31, 2007 and
        March 31, 2006, respectively. As of March 31, 2007, we had a working capital
        deficiency of $774,322 (current assets less current liabilities) and an
        accumulated deficit of $12,472,620. With our current resources we expect
        to be
        able to satisfy our cash requirements through March 31, 2007 In order to
        expand
        our current business operations, fund future development and market and sell
        our
        three existing product lines we will need to raise at least $5 million in
        financing over the next twelve months. There are no assurances that we will
        be
        able to achieve a level of revenues adequate to generate sufficient cash
        flow
        from operations or obtain additional financing through private placements,
        public offerings and/or bank financing necessary to support our working capital
        requirements. To the extent that funds generated from any private placements,
        public offerings and/or bank financing are insufficient, we will have to
        raise
        additional working capital. No assurance can be given that additional financing
        will be available, or if available, will be on acceptable terms. These
        conditions raise substantial doubt about our ability to continue as a going
        concern. If adequate working capital is not available we may be forced to
        discontinue operations, which would cause investors to lose the entire amount
        of
        their investment.
  **We
        Need Significant Infusions Of Additional Capital, Which May Result In Dilution
        To Our Shareholders' Ownership And Voting Rights In Our
        Company.**
  Based
        upon our current cash reserves and forecasted operations, we believe that
        we
        will need to obtain at least $1 million of outside funding in order to sustain
        our current business operations over the next twelve months, and at least
        $5
        million of outside funding in order to expand our business, fund future
        development and market and sell our three existing product lines. Our need
        for
        additional capital to finance our business strategy, operations, and growth
        will
        be greater should, among other things, revenue or expense estimates prove
        to be
        incorrect. If we fail to arrange for sufficient capital in the future, we
        may be
        required to reduce the scope of our business activities until we can obtain
        adequate financing. We may not be able to obtain additional financing in
        sufficient amounts or on acceptable terms when needed, which could adversely
        affect our operating results and prospects. Debt financing must be repaid
        regardless of whether or not we generate profits or cash flows from our business
        activities. Equity financing may result in dilution to existing shareholders
        and
        may involve securities that have rights, preferences, or privileges that
        are
        senior to our common stock.
   **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 Chief Executive
        Officer and through the issuance of shares of our common stock. There can
        be no
        assurance that our Chief Executive 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 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.
  49
  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.
  **We
        May Incur Material Product Liability Costs.**
  We
        are in
        the business of formulating and selling nutritional supplements for human
        consumption. As a distributor of products designed for human consumption,
        we are
        subject to product liability claims if the use of our products is alleged
        to
        have resulted in injury. We may be subject to various product liability claims,
        including, among others, allegations that our products include inadequate
        instructions for use or inadequate warnings concerning possible side effects
        and
        interactions with other substances. In addition, although our manufacturers
        maintain quality controls and procedures with respect to products that we
        sell,
        our products could contain contaminated substances. All of the products we
        sell
        are produced by third-party manufacturers. As a distributor of products
        manufactured by third parties, we may also be liable for various product
        liability claims for products we do not manufacture even though we have no
        control over the manufacturing procedures used in connection with the production
        of these third-party products. We are in the process of applying for product
        liability insurance. Such insurance, once obtained, may not be available
        at a
        reasonable cost, or may not be adequate to cover liabilities.
  **If
        We Are Not Able To Manage Growth Of Our Business, Our Financial Condition
        And
        Results Of Operations Will Be Negatively Affected.**
  Over
        the
        next six to eighteen months, we anticipate launching our King of Herbs, Taoist
        Medicinal and Vitamins and Supplements products lines upon the receipt of
        funding. We have not yet implemented any marketing and distribution strategies.
        Accordingly, we may experience a period of significant growth. While we have
        not
        experienced problems with growth of our business in the past, any future
        growth
        could cause significant strain on our managerial, operational, financial
        and
        other resources. Success in managing this expansion and growth will depend,
        in
        part, upon the ability of our senior management to effectively manage the
        growth
        of our business. Any failure to manage the proposed growth and expansion
        of our
        business could have a material adverse effect on our financial condition
        and
        results of operations.
  **Our
        Strategy Of Growth Through Acquisition Is Inherently
        Risky.**
 
 We
        intend
        to seek to identify and develop merger and/or acquisitions candidates in
        the
        Peoples Republic of China and worldwide as part of our growth plan to secure a
        strong future. Although we have signed a Letters of Intent to acquire WangJing
        Hospital and WangJing Hospital of China Academy of Chinese Medical Sciences,
        Shaanxi WanAn Pharmaceutical Co. Ltd. and Henan Tiankang Pharmaceuticals
        Ltd.,
        there can be no assurance that any or all of such acquisitions will be
        completed. Even if the acquisitions are completed, the final terms of the
        acquisition agreements may vary substantially from the terms described in
        this
        Offering Memorandum.
 
 Our
        acquisition of companies and businesses and expansion of operations involve
        risks, including the following:
 ·
            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 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.
  50
  **If
        Our Relationships With Our Manufacturers Terminate, Or Their Facilities Are
        Damaged Or Destroyed, We May Be Unable To Develop Or Commercialize Our Products.**
  Currently,
        only a limited number of companies manufacture our products. The number of
        contract manufacturers with the expertise, required regulatory approvals
        and
        facilities to manufacture our product candidates on a commercial scale is
        extremely limited, and it would take a significant amount of time to arrange
        for
        alternative manufacturers. If any of our manufacturers fail to deliver the
        required commercial quantities of bulk substance or finished product on a
        timely
        basis and at commercially reasonable prices, and we are unable to find one
        or
        more replacement manufacturers capable of production at a substantially
        equivalent cost, in substantially equivalent volumes and quality, and on
        a
        timely basis, we will likely be unable to meet customer demand as we begin
        to
        market and sell our existing product lines.
  **The
        Loss Of Our Current Management Team Could Have A Material Adverse Effect
        On Our
        Business. If We Are Not Able To Retain Additional Key Personnel, Our Business
        Could Suffer.**
  Our
        success depends to a large degree upon the skills of our current management
        team
        and directors and advisors, including Ms. Julianna Lu and Dr. Li, Dahong
        and Mr.
        Xiao Fei Yu and Mr. Simpson, James H., and upon our ability to identify,
        hire,
        and retain additional senior management, sales, marketing, scientific, and
        financial personnel. Although, to date we have not experienced problems
        attracting and retaining key personnel, we may encounter such problems in
        the
        future as we grow and expand our operations. The loss of any of our current
        executives, employees, or advisors or the failure to attract, integrate,
        motivate, and retain additional key employees could have a material adverse
        effect on our business. To our knowledge, none of our key employees has plans
        to
        retire or leave us in the near future. We do not have "key person" insurance
        on
        the lives of any of our management team.
  **RISKS
        RELATED TO OUR INDUSTRY**
  **The
        Nutritional Supplements Industry Is Intensely Competitive. We Have Many
        Well-Established Competitors With Substantially Greater Financial And Other
        Resources Than Us. These Factors May Make It More Difficult For Us To
        Successfully Implement Our Business Plan And May Adversely Affect Our Results
        Of
        Operations.**
  The
        nutritional supplements industry is a large, highly fragmented and growing
        industry, with no single industry participant accounting for more than 10%
        of
        total industry retail sales. Participants include specialty retailers,
        supermarkets, drugstores, mass merchants (wholesalers), multi-level marketing organizations,
        mail order companies and a variety of other smaller participants. The market
        is
        also highly sensitive to the introduction of new products, including various
        prescription drugs, which may rapidly capture a significant share of the
        market.
        Increased competition from companies that distribute through retail or wholesale
        channels could have a material adverse effect on our financial condition
        and
        results of operations. Some of the nutraceutical companies that we will compete
        with are Weider Nutrition International, Inc., USANA Health Sciences Inc.,
        Nature's Sunshine Products, Inc. and Herbalife International, Inc. We are
        a
        development stage business and the only revenues we have received from product
        sales since inception were nominal and were generated during 2004. Accordingly,
        we have not been operational long enough to experience any of the above
        problems. However, since we are a development stage business, most, if not
        all
        companies in our industry have greater financial and other resources available
        to them and possess manufacturing, distribution and marketing capabilities
        greater than ours. In addition, our competitors may be more effective and
        efficient in integrating new products. We may not be able to compete effectively
        and any of the factors listed above may cause price reductions, reduced margins
        and difficulties in gaining market share.
  **Compliance
        With Governmental Regulations May Impose Additional Costs, Which May Adversely
        Affect Our Financial Condition And Results Of Operations.**
  The
        processing, formulation, manufacturing, packaging, labeling, advertising
        and
        distribution of our products are subject to regulation by one or more federal
        agencies, including the Health Protectorate Branch in Canada, the FDA, the
        Federal Trade Commission ("FTC"), the Consumer Product Safety Commission,
        the
        United States Department of Agriculture, the United States Customs and Border
        Protection and the Environmental Protection Agency. These activities are
        also
        regulated by various agencies of the states and localities in which our products
        are sold.
  The
        FDA
        may attempt to regulate any of our products that fall within its jurisdiction,
        and the FTC has jurisdiction to regulate the advertising of our products
        that
        fall within its jurisdiction. The FDA may not accept the evidence of safety
        for
        any new ingredients that we may want to market, may determine that a particular
        product or product ingredient presents an unacceptable health risk, may
        determine that a particular statement of nutritional support that we want
        to use
        is an unacceptable drug claim or an unauthorized version of a food "health
        claim," may determine that a particular product is an unapproved new drug,
        or
        the FDA or the FTC may determine that particular claims are not adequately
        supported by available scientific evidence. Such a determination would prevent
        us from marketing particular products or using certain statements of nutritional
        support on our products. One of the key areas of our development focus is
        the
        specialty supplements category, which includes products that are directed
        at
        particular nutritional concerns. The FDA may not agree with our statements
        of
        nutritional support as to a particular specialty supplement or permit us
        to
        promote our specialty supplements directed at particular nutritional concerns.
        We also may be unable to disseminate third-party literature in connection
        with
        our products if the third-party literature fails to satisfy certain
        requirements. In addition, the FDA could require us to remove a particular
        product from the market. Any future recall or removal would result in additional
        costs to us, including lost revenues from any products that we are required
        to
        remove from the market, any of which could be material. Any such product
        recalls
        or removals could lead to liability, substantial costs and reduced growth
        prospects.
  51
  Although
        the regulation of dietary supplements is less restrictive than the regulation
        of
        drugs, dietary supplements may not continue to be subject to less restrictive
        regulation. Many of our dietary supplements contain traditional Chinese herbs
        which may or may not have been previously evaluated by the FDA. All herbs
        marketed in dietary supplements in the United States must be Generally
        Recognized as Safe (GRAS). The FDA maintains a list of problems herbs. If
        any of
        the herbs in our products appeared on the FDA's list, or if the agency
        determined there were issues concerning their safety, we would not be able
        to
        market the products containing these ingredients in the United States. We
        have
        not determined whether any of the herbs in our products are on the FDA's
        list of
        problem herbs and we have not determined whether any such herbs are Generally
        Recognized as Safe. If any of the herbs in our products have not been evaluated
        by the FDA and are not Generally Recognized as Safe, then we would not be
        permitted to sell products containing them in the United States. Any such
        prohibition could materially adversely affect our results of operations and
        financial condition.
  Further,
        if more stringent statutes are enacted for dietary supplements, or if more
        stringent regulations are promulgated, we may not be able to comply with
        such
        statutes or regulations without incurring substantial expense, or at all.
        Legislation has been introduced in Congress to impose substantial new regulatory
        requirements for dietary supplements including adverse event reporting, post
        market surveillance requirements, FDA reviews of dietary supplement ingredients,
        safety testing and records inspection. If enacted, any of the proposed
        legislation may result in difficulty getting our products to the market and
        could raise our costs and hinder our business.
  In
        addition, we expect that the FDA soon will adopt the proposed rules on Good
        Manufacturing Practice in manufacturing, packaging, or holding dietary
        ingredients and dietary supplements, which will apply to the products we
        manufacture. These regulations will require dietary supplements to be prepared,
        packaged and held in compliance with strict rules, and will require quality
        control provisions similar to those in the Good Manufacturing Practice
        regulations for drugs. We may not be able to comply with the new rules without
        incurring additional expenses.
  Each
        of
        our products imported into the United States may be blocked at the border
        by
        U.S. Customs. The FDA could issue Import Alerts for any of our products if
        the
        agency considers them to be misbranded, adulterated and/or unapproved new
        drugs.
  The
        FTC
        exercises jurisdiction over the advertising of dietary supplements. In the
        past,
        the FTC has instituted numerous enforcement actions against dietary supplement
        companies for failure to have adequate substantiation for claims made in
        advertising or for the use of false or misleading advertising claims. These
        enforcement actions have often resulted in consent decrees and the payment
        of
        civil penalties by the companies involved.
  We
        are
        also subject to regulation under various state, local, and international
        laws
        that include provisions governing, among other things, the processing,
        formulation, manufacturing, packaging, labeling, advertising and distribution
        of
        our products that are deemed "dietary supplements" or "over-the-counter drugs."
        Government regulations in foreign countries may prevent or delay the
        introduction, or require the reformulation, of certain of our products. In
        addition, from time to time in the future, Congress, the FDA, the FTC or
        other
        federal, state, local or foreign legislative and regulatory authorities may
        impose additional laws or regulations that apply to us, repeal laws or
        regulations that we consider favorable to us or impose more stringent
        interpretations of current laws or regulations. We are not able to predict
        the
        nature of such future laws, regulations, repeals or interpretations or to
        predict the effect additional governmental regulation, when and if it occurs,
        would have on our business in the future. Such developments could, however,
        require reformulation of certain products to meet new standards, recalls
        or
        discontinuance of certain products not able to be reformulated, additional
        record-keeping requirements, increased documentation of the properties of
        certain products, additional or different labeling, additional scientific
        substantiation, or other new requirements. Any such developments could have
        a
        material adverse effect on our business, financial condition and results
        of
        operations.
  **RISKS
        RELATED TO OUR COMMON STOCK**
  **There
        Is A Limited Public Market For Our Common Stock. Failure To Develop Or Maintain
        A Trading Market Could Negatively Affect The Value Of Our Shares And Make
        It
        Difficult Or Impossible For Shareholders To Sell Their Shares.**
   On
        April
        18, 2005, our common stock was approved for quotation on the OTC Bulletin
        Board
        under the symbol "CHHH." To date there is a limited trading market in our
        common
        stock on the OTC Bulletin Board. Failure to develop or maintain an active
        trading market could negatively affect the value of our shares and make it
        difficult for our shareholders to sell their shares or recover any part of
        their
        investment in us. The market price of our common stock may be highly volatile.
        In addition to the uncertainties relating to our future operating performance
        and the profitability of our operations, factors such as variations in our
        interim financial results, or various, as yet unpredictable factors, many
        of
        which are beyond our control, may have a negative effect on the market price
        of
        our common stock.
  **OUR
        COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE TRADING
        MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR COMMON
        STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR
        STOCK.**
  52
 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.
 
 **ITEM
        3. CONTROLS AND PROCEDURES.**
 
 (a)
        EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. As of the date of this
        report,
        the Company's management carried out an evaluation, under the supervision
        of the
        Company's Chief Executive Officer and the Chief Financial Officer of the
        effectiveness of the design and operation of the Company's system of disclosure
        controls and procedures pursuant to the Securities and Exchange Act, Rule
        13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation,
        the
        Chief Executive Officer and Chief Financial Officer concluded that the Company's
        disclosure controls and procedures were effective, as of the date of their
        evaluation, for the purposes of recording, processing, summarizing and timely
        reporting material information required to be disclosed in reports filed
        by the
        Company under the Securities Exchange Act of 1934.
  (b)
        CHANGES IN INTERNAL CONTROLS. There were no changes in internal controls
        over
        financial reporting that occurred during the period covered by this report
        that
        has materially affected, or is likely to materially effect, the Company's
        internal control over financial reporting.
  **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
        January 8, 2007, the Company issued 9,000 shares of common stock with a fair
        value of $.061 per share for consulting services.
  On
        January 26, 2007, the Company issued 13,000 shares of common stock with a
        fair
        value of $.14 per share for consulting services
  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
  53
 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.
  On
        January 30, 2007, the Company issued 120,000 shares of common stock with
        a fair
        value of $.115 per share for legal services.
  On
        February 23, 2007, the company issued 59,400 shares of common stock with
        fair
        value of $0.1 per share for consulting services
  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
  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
  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.
  On
        March
        16, 2007, the Company issued 150,000 shares of common stock with a fair value
        of
        $.076 per share 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**
  None.
  **ITEM
        6. EXHIBITS**
  31.1
              
              Certification
                  by Chief Executive Officer/Chief Financial Officer, required by
                  Rule
                  13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant
                  to
                  Section 302 of the Sarbanes-Oxley Act of 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
 
 54
  **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:
                May 16, 2007
              By:
              /s/ *Julianna
                Lu*Julianna
                LuChief
                  Executive Officer, PrincipalFinancial
                  Officer, Principal Accounting Officer, Treasurer and Chairman of
                  the Board
                  of Directors
 
   55