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


                                 Amendment No. 2
                                       to
                                   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 JUNE 30, 2006


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

                  For the Transition Period From _____ to _____

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

                        Commission File Number 333-119034

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

             NEVADA                                     98-0432681
(State or other jurisdiction of                     (I.R.S. Employer
 incorporation or organization)                     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 June 30, 2006 were $0.

As of August 11,  2006 there were  62,414,551  shares of issuer's  common  stock
issued and  outstanding  and  1,250,000  Series A  Preferred  Shares  issued and
outstanding.

<PAGE>


Explanatory Note:


On August 14, 2006, China Health  Holdings,  Inc. (the "Company") filed its Form
10-QSB for the period  ended June 30, 2006 without the consent and review of its
auditors, Dale Matheson Carr-Hilton LaBonte. The Company is filing this 10-QSB/A
upon  the  completion  of the  review  and  with the  consent  of Dale  Matheson
Carr-Hilton LaBonte.




                                       2
<PAGE>
                           CHINA HEALTH HOLDING, INC.
                                  FORM 10-QSB/A
                   For the Fiscal Quarter Ended June 30, 2006

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

Part I                                                                      Page

Item 1.  Financial Statements.                                             .  4

Item 2.  Management's Discussion and Analysis or Plan of Operations.         24

Item 3.  Controls and Procedures                                             33

Part ll                                                                     Page

Item 1.  Legal Proceedings.                                                  34

Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds          34

Item 3.  Defaults Upon Senior Securities                                     34

Item 4.  Submission of Matters to a Vote of Security Holders.                34

Item 5.  Other Information                                                   34

Item 6. Exhibits.                                                            34

Signatures.                                                                  35



                                       3
<PAGE>
                            CHINA HEALTH HOLDING INC.

                          (a development stage company)

                    CONSOLIDATED INTERIM FINANCIAL STATEMENTS


                                  JUNE 30, 2006

                                   (Unaudited)






CONSOLIDATED BALANCE SHEETS

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS





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

                           CONSOLIDATED BALANCE SHEETS


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

CURRENT ASSETS
    Cash                                                                                 4,019                  14,887
    Prepaid expenses                                                                     2,681                   5,126
                                                                                    ----------             -----------
Total current assets                                                                     6,700                  20,013

PROPERTY AND EQUIPMENT, net (Note 4)                                                    13,127                  14,631

INTANGIBLE ASSETS (Note 3)                                                                   3                       3
------------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                            19,830                  34,647

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

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
    Accounts payable and accrued liabilities                                            37,946                  33,785
     Due to shareholders (Note 5)                                                      968,159                 584,639
                                                                                    ----------              ----------
Total current liabilities                                                            1,006,105                 618,424
                                                                                    ----------              ----------

COMMITMENTS (Notes 3 and 9)


       Preferred stock, $0.001 par value, 20,000,000 shares authorized,
          1,250,000 (December 31, 2005 - 1,000,000) shares issued and
          outstanding (Note 6)                                                           1,250                   1,000
       Common stock, $0.001 par value, 300,000,000 shares authorized
       62,414,551 (December 31, 2005 - 46,596,931) shares issued and
          outstanding (Note 6)                                                          62,415                  46,597
       Additional paid-in capital                                                    7,027,668               5,676,104
       Deferred Compensation (Note 6 and 7)                                           (809,787)               (257,514)
       Deficit accumulated during the development stage                             (7,211,978)             (5,996,301)
       Accumulated other comprehensive loss                                            (55,843)                (53,663)
                                                                                    ----------              ----------
Total Stockholders' (Deficit)                                                         (986,275)               (583,777)


TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)                                           19,830                  34,647

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

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


                                        5
<PAGE>

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

                  INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 Cumulative
                                                                                                                 results of
                                                                                                               operations from
                                                                                                                April 3, 2002
                                             Three Month      Three Month      Six Month        Six Month      (inception) to
                                            Period ended     Period ended     Period ended    Period ended        June 30,
                                            June 30, 2006    June 30, 2005   June 30, 2006    June 30, 2005         2006
                                                  $                $               $                $                 $

<S>                                               <C>          <C>                <C>           <C>               <C>
SALES                                                   -               -                -                -             8,976
Cost of goods sold                                      -               -                -                -              (245)
                                            -------------  --------------   --------------   --------------    --------------
                                                        -
                                                                        -                -                -              8,731
                                            -------------  --------------   --------------   --------------    --------------
                                                        -

EXPENSES
       Advertising and promotion                    3,280          37,589            3,280           46,302            119,127
       Amortization of intangible assets                -               -                -                -              7,125
       Consulting fees (Notes 6 and 7)            276,210         177,073          393,314          389,525          2,316,203
       Depreciation                                 1,338             721            2,390            1,259              7,296
       Interest and bank charges (Note 8)          16,454           3,457           37,793           17,626            111,253
       Investor relations                          37,526               -           72,005                -            106,628
       Management fees (Note 7)                   354,295          54,000          523,833           84,000          1,724,229
       Office                                      15,291               -           24,085            5,005             50,580
       Professional fees (Note 7)                  68,778          32,383          130,415          152,870            672,520
       Rent                                         7,291           4,695           15,402            9,854             68,971
       Research and development
       (Note 3)                                         -               -                -            3,904          1,743,593
       Travel                                         356             914            3,912                -             30,082
       Vehicle                                      5,003               -            8,109                -             15,801
                                            -------------  --------------   --------------   --------------     --------------
                                                  785,822         310,832        1,214,538          710,345          6,973,408
                                            -------------  --------------   --------------   --------------     --------------

NET LOSS FROM OPERATIONS                         (785,822)       (310,832)      (1,214,538)        (710,345)        (6,964,677)

OTHER INCOME (EXPENSES)
       Foreign exchange                              (736)          2,193           (1,139)          (7,284)            20,706
       Impairment of licensing rights
       (Note 3)                                         -               -                -       (1,359,999)          (182,874)

                                            -------------  --------------   --------------   --------------     --------------
       Gain (Loss) on settlement of debts
       and issuance of  shares
       (Notes 7 and 11)                                 -          (9,192)               -          (9,192)            (85,133)
                                            -------------  --------------   --------------   --------------     --------------
                                                     (736)         (6,999)          (1,139)      (1,376,475)           (247,301)
                                            -------------  --------------   --------------   --------------     --------------
NET LOSS                                         (786,558)       (317,831)      (1,215,677)      (2,086,820)         (7,211,978)
                                            -------------  --------------   --------------   --------------     --------------
BASIC NET LOSS PER SHARE                    $       (0.01) $        (0.01)  $        (0.02)           (0.05)

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                             61,668,000      42,577,000        56,803,000      40,128,406


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

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

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


OPERATING ACTIVITIES
<S>                                                <C>              <C>            <C>            <C>               <C>
       Net loss                                    (786,558)        (317,831)   (1,215,677)    (2,086,820)       (7,211,978)
       Adjustments to reconcile net loss to
       cash used in operating activities:
          Accrued interest                           15,839            8,670        35,908         16,800           106,068
          Amortization of intangible assets               -                -             -              -             7,125
          Depreciation                                1,338              721         2,390          1,259             7,296
          Impairment of licensing rights                  -                -             -              -           182,874
          License rights                                  -                -             -      1,359,999         1,359,999
          Loss on settlement of debts and
            issuance of shares                            -            9,192             -          9,192            84,476
          Non cash expenses paid with shares        315,599          226,090       436,750        541,095         2,708,124
          Stock-based compensation                  222,197                -       378,609              -         1,690,792

       Changes in operating assets and
       liabilities
          Prepaid expenses                            4,795                -         2,445              -            25,454
          Accounts payable and accrued
          liabilities                                17,326                -         4,161              -            46,326
                                              -------------    ------------- -------------  -------------     -------------
Net cash used in operating activities
                                                   (209,464)         (73,158)     (355,414)      (158,475)         (993,444)
                                              -------------    ------------- -------------  -------------     -------------

INVESTING ACTIVITIES
       Purchase of property and equipment                             (2,579)            -         (7,285)          (19,536)
                                              -------------    ------------- -------------  -------------     -------------
                                                          -
Net cash used in investing activities                                 (2,579)            -         (7,285)          (19,536)
                                              -------------    ------------- -------------  -------------     -------------
                                                          -

FINANCING ACTIVITIES
       Issuance of common stock                           -                -             -        245,000           513,697
       Net  advances (repayment) from
       shareholders                                 188,155          (15,910)      347,612        (55,757)          560,031
                                              -------------    ------------- -------------  -------------     -------------
Net cash provided by financing activities           188,155          (15,910)      347,612        189,243         1,073,728
                                              -------------    ------------- -------------  -------------     -------------

EFFECT OF EXCHANGE RATE CHANGES                      11,314           (8,335)       (3,066)         1,692           (56,729)
                                              -------------    ------------- -------------  -------------     -------------

NET (DECREASE) INCREASE IN CASH                      (9,995)         (99,982)      (10,868)        25,175             4,019

CASH, BEGINNING OF YEAR                              14,014          128,668        14,887          3,511                 -

CASH, END OF YEAR                                     4,019           28,686         4,019         28,686             4,019

SUPPLEMENTARY NON-CASH INFORMATION (Note 7)

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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


1.   NATURE OF OPERATIONS AND BASIS OF PRESENTATION


     China Health Holding Inc. (the "Company") is a Nevada company  incorporated
     on April 3, 2002 as A E&E Pharma Corporation.  The Company changed its name
     to China Health  Holding Inc. on May 25, 2004. The Company is a development
     stage company that is engaged in the  development  of potential  merger and
     acquisition  opportunities with major pharmaceutical  companies in PR China
     and  ultimately  the  development  of a  pharmaceutical  drug  pipeline and
     technology. (Note 9)

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

     UNAUDITED INTERIM FINANCIAL STATEMENTS

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


2.   SIGNIFICANT ACCOUNTING POLICIES


a)   Basis of presentation

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

     The financial statements have been prepared on the basis of a going concern
     which  contemplates  the  realization  of assets  and the  satisfaction  of
     liabilities  in the normal  course of  business.  The Company has a working
     capital deficiency of $999,405 and a stockholders'  deficit of $986,275 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.


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006



2.   SIGNIFICANT ACCOUNTING POLICIES - CONT'D


a)   Basis of presentation (continued)

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

b)   Consolidation

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

c)   Use of estimates and assumptions

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


d)   Property and equipment

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

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

e)   Revenue recognition

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

f)   Net loss per common share

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

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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


2.   SIGNIFICANT ACCOUNTING POLICIES - CONT'D


g)   Fair value of financial instruments

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

h)   Intangible assets

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

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

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

i)   Foreign currency translation

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


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006



2.   SIGNIFICANT ACCOUNTING POLICIES - CONT'D


j)   Income taxes

     The Company follows SFAS No. 109,  "Accounting for Income Taxes", using the
     liability  method of  accounting  for  income  taxes.  Under  this  method,
     deferred income tax assets and liabilities are recognized for the estimated
     tax  consequences   attributable  to  differences   between  the  financial
     statement  carrying values and their respective income tax basis (temporary
     differences). The effect on deferred income tax assets and liabilities of a
     change in tax rates is recognized in income in the period that includes the
     enactment  date.  At June 30,  2006,  full  deferred  tax  asset  valuation
     allowance  has been  provided  and no deferred  tax asset  benefit has been
     recorded.

k)   Stock-based compensation


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

     The  following  table  illustrates  the pro forma  effect on net income and
     earnings  per share as if the Company  had  accounted  for its  stock-based
     employee compensation using the fair value provisions of SFAS No. 123 using
     the assumptions as described in Note 6:
<TABLE>
<CAPTION>
                                                                               Three Months                    Six Months
                                                                               Ended June 30,                 Ended June 30,
                                                                             2006            2005          2006           2005
                                                                               $              $              $              $


<S>                                                                            <C>           <C>            <C>          <C>
         Net loss -- as reported                                            (786,558)     (317,831)    (1,215,677) (2,086,820)
         Add: Stock-based compensation expense included in net
           loss -- as reported                                                     -             -              -           -
         Deduct: Stock-based compensation expense determined under
           fair value method                                                       -             -              -           -
                                                                   --------------------------------------------------------------
         Net loss -- pro forma                                              (786,558)     (317,831)    (1,215,677) (2,086,820)
                                                                   --------------------------------------------------------------

         Net loss per share - basic and diluted -- as reported                 (0.01)        (0.01)         (0.02)      (0.05)
         Net loss per share - basic and diluted -- pro forma                   (0.01)        (0.01)         (0.02)      (0.05)

</TABLE>

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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006



2.   SIGNIFICANT ACCOUNTING POLICIES - CONT'D


l)   Recent accounting pronouncements

     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.

     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.


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006



3.   INTANGIBLE ASSETS


a)   Asset purchase agreement

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

     - 2,200,000 common shares at a fair value of $0.87 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.


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006



3.   INTANGIBLE ASSETS - CONT'D

b)   Licensing rights agreement

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

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


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


3.   INTANGIBLE ASSETS - CONT'D

b)   Licensing rights agreement - cont'd

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

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

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

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

c)   Asset purchase agreement

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

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

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

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


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006



4.   PROPERTY AND EQUIPMENT


     Property and equipment consists of the following:
                                                        June 30,   December 31,
                                                         2006        2005
                                                           $           $

     Computer                                            17,445        16,688
     Furniture and Fixtures                               2,978         2,849
                                                      ---------     ---------
                                                         20,423        19,537

     Less:  accumulated depreciation                     (7,296)       (4,906)
                                                      ---------     ---------

                                                         13,127        14,631
                                                      =========     ---------


5.   DUE TO SHAREHOLDERS


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


6.   CAPITAL STOCK


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

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

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

     During  the period  ended  June 30,  2006,  the  Company  issued a total of
     4,000,000 common shares for services at an average of $0.10 per share for a
     total consideration of $412,000.

     During the period ended June 30, 2006,  the Company  issued a total 168,388
     common  shares  for  corporate  expenses  at $0.10 per share for a total of
     $16,165.

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


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


6.   CAPITAL STOCK - CONT'D
<TABLE>
<CAPTION>
     The Company has granted stock options as follows:
                                                       -------------------- ------------------------ ------------------------
                                                                               Weighted Average          Weighted Average
                                                        Number of Options       Exercise price         Remaining Contractual
                                                                                       $                       Life
                                                       -------------------- ------------------------ ------------------------

<S>                                                               <C>                 <C>                    <C>
         Balance, December 31, 2005                              7,979,175           0.20                   2.53 years

         Issued during the period                                6,650,000           0.20                        -
         Cancelled during the period                            (1,000,000)          0.20                        -
         Expired during the period                                (300,000)          0.30                        -
                                                       -------------------- ------------------------ ------------------------

         Balance, June 30, 2006                                 13,329,175           0.19                   2.36 years
                                                       ==================== ======================== ========================

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

         Issued during the period                                1,200,000           0.36                        -
         Cancelled during the period                            (1,400,000)          0.13                        -
         Expired during the period                                (100,000)          0.10                        -

         Balance June 30, 2005                                   6,300,000           0.15                   2.96 years
                                                       ==================== ======================== ========================
</TABLE>

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

b)   On January 22,  2006,  the Company  granted  1,000,000  stock  options to a
     consultant  with an exercise  price of $0.20 per share subject to immediate
     vesting.  Stock-based  compensation  of $25,433 was recorded as  consulting
     expense and $89,275 as deferred  compensation  during the six month  period
     ended June 30, 2006.  The fair value of the stock  options was estimated by
     application  of the fair value method using Black  Scholes  option  pricing
     model. Assumptions used in this model were as follows:

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

c)   On January 22,  2006,  the Company  granted  1,000,000  stock  options to a
     consultant  with an exercise  price of $0.20 per share subject to immediate
     vesting.  Stock-based  compensation  of $16,766 was recorded as  consulting
     expense and $98,087 as deferred  compensation  during the six month  period
     ended June 30, 2006.  The fair value of the stock  options was estimated by
     application  of the fair value method using Black  Scholes  option  pricing
     model. Assumptions used in this model were as follows:

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


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


6.   CAPITAL STOCK - CONT'D


d)   On January 22, 2006,  the Company  granted  2,500,000  stock options to the
     President of the Company with an exercise  price of $0.20 per share subject
     to immediate vesting.  Stock-based compensation of $242,685 was recorded as
     consulting  expense  and $34,137 as  deferred  compensation  during the six
     month period ended June 30, 2006.  The fair value of the stock  options was
     estimated  by  application  of the fair value  method  using Black  Scholes
     option pricing model. Assumptions used in this model were as follows:

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

e)   On January 28,  2006,  the Company  granted  1,000,000  stock  options to a
     consultant  with an exercise  price of $0.20 per share subject to immediate
     vesting.  Stock-based  compensation  of $37,848 was recorded as  consulting
     expense and $145,860 as deferred  compensation  during the six month period
     ended June 30, 2006.  The fair value of the stock  options was estimated by
     application  of the fair value method using Black  Scholes  option  pricing
     model. Assumptions used in this model were as follows:

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

f)   On  February 1, 2006,  the Company  granted  1,000,000  stock  options to a
     consultant  with an exercise  price of $0.20 per share subject to immediate
     vesting.  Stock-based  compensation  of $48,987 was recorded as  consulting
     expense and $193,857 as deferred  compensation  during the six month period
     ended June 30, 2006.  The fair value of the stock  options was estimated by
     application  of the fair value method using Black  Scholes  option  pricing
     model. Assumptions used in this model were as follows:

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

g)   On  February  7, 2006,  the  Company  granted  150,000  stock  options to a
     consultant  with an exercise  price of $0.30 per share subject to immediate
     vesting.  Stock-based  compensation  of $5,669 was  recorded as  consulting
     expense and $15,516 as deferred  compensation  during the six month  period
     ended June 30, 2006.  The fair value of the stock  options was estimated by
     application  of the fair value method using Black  Scholes  option  pricing
     model. Assumptions used in this model were as follows:

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


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


6.   CAPITAL STOCK - CONT'D


h)   During the six month period ended June 30, 2006, the Company  decreased the
     exercise price of 100,000 stock options granted to a consultant  during the
     year  ended  December  31,  2005,  from $1.00 per share to $0.30 per share.
     Stock-based  compensation  of $711 was recorded as  consulting  expense and
     $1,945 as deferred  compensation during the six month period ended June 30,
     2006.  The fair value of the stock options was estimated by  application of
     the fair value method using Black Scholes option pricing model. Assumptions
     used in this model were as follows:

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

i)   During the six month period ended June 30, 2006, the Company  decreased the
     exercise price of 100,000 stock options granted to a consultant  during the
     year  ended  December  31,  2005,  from $1.00 per share to $0.30 per share.
     Stock-based  compensation  of $510 was recorded as  consulting  expense and
     $1,508 as deferred  compensation during the six month period ended June 30,
     2006.  The fair value of the stock options was estimated by  application of
     the fair value method using Black Scholes option pricing model. Assumptions
     used in this model were as follows:

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


j)   On May 1, 2006,  the Company  increased the exercise price of 250,000 stock
     options  granted to a  consultant  from $.30 to $0.50 per share for 125,000
     stock options and $1.00 per share for the remaining 125,000 stock options.

<TABLE>
<CAPTION>
     The Company has issued share purchase warrants as follows:
                                                                    Number of      Weighted Average
                                                                     Warrants        Exercise Price

<S>                                                                    <C>                <C>
         Balance, December 31, 2004                                   339,000            0.56

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

         Balance, June 30, 2005                                     1,419,000            0.70
                                                                  ===========            ====

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

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

         Balance, June 30, 2006                                       100,000            0.11
                                                                  ===========            ====
</TABLE>

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

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


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


7.   SUPPLEMENTARY NON-CASH INFORMATION


i)   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.

ii)  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 June
     30, 2006.

The Company entered into the following non-cash transactions:

a.   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.

b.   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.

c.   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.

d.   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.

e.   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.

f.   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.

g.   On February 21, 2006,  the Company  issued 375,000 shares with a fair value
     of $0.10 per share for $36,000 of  consulting  services.  At June 30, 2006,
     $29,402 is included in deferred compensation.

h.   On February 21, 2006,  the Company  issued 187,500 shares with a fair value
     of $0.10 per share  for  $18,000  of  filing  services.  At June 30,  2006,
     $12,302 is included in deferred compensation.

i.   On February 16, 2006, the Company declared a stock dividend on the basis of
     one new  share of  common  stock for  every  four  shares  of common  stock
     outstanding,  and one 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.

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

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

l.   On January 28, 2006,  the Company  issued 250,000 common shares with a fair
     value of $0..15 per share for  $38,000  of  consulting  services,  of which
     $31,028 is included as a deferred compensation at June 30, 2006.

m.   On January 22, 2006,  the Company  issued 312,500 common shares with a fair
     value of $0.10 per share for $30,000 of  consulting  services.  At June 30,
     2006, $24,774 is included in deferred compensation.

n.   On January 22, 2006,  the Company  issued 168,388 common shares with a fair
     value of $0.10 per share for  settlement  of  $16,165  for  $13,039 of auto
     expenses,  of which $9,094 is included as a deferred  compensation  at June
     30, 2006.


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


7.   SUPPLEMENTARY NON-CASH INFORMATION- CONT'D


o.   On January 18, 2006,  the Company  issued 375,000 common shares with a fair
     value of $0.09 per share for $33,000 of management  consulting services. At
     June 30, 2006, $4,127 is included in deferred compensation.

p.   On January 17, 2006,  the Company  issued 312,500 common shares with a fair
     value of $0.10 per share for $30,000 of  consulting  services.  At June 30,
     2006, $24,110 is included in deferred compensation.

q.   During the quarter ended June 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)).

r.   During 2004, the Company issued  1,250,000  common shares with a fair value
     of $0.20 per share  pursuant  to a two-year  services  agreement.  In 2004,
     $46,875 was  recorded  as  consulting  fees and  $203,125  was  recorded as
     prepaid  expenses.  Pursuant to the same  agreement,  the  Company  granted
     1,000,000  stock options to the consultant  with an exercise price of $0.10
     per share  subject to  immediate  vesting.  These  options  were granted in
     respect of a contract  that  required  services to be performed  over a two
     year term.  The  intrinsic  value of these options at the date of grant was
     estimated to be $150,000.  In 2004, $9,375 was recorded as a consulting fee
     and $140,625 was recorded as a prepaid expense.

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

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


8.   RELATED PARTY TRANSACTIONS


     The Company has entered into the following related party transactions:

a)   Recorded management and consulting fees to directors and officers totalling
     $731,508 (June 30, 2005 - $130,800);

b)   Accrued interest expense to directors and  shareholders  totalling  $35,212
     (June 30, 2005 - $69,122);


9.   COMMITMENTS


a)   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. Pursuant to the Letter of Intent, the
     Company has first refusal rights and legal exclusive  rights to acquire 51%
     or more of Henan for a period of nine months from the date of letter.

b)   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.


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

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


9.    COMMITMENTS


c)   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 June 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.

d)   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.

e)   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.

f)   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.

g)   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.

h)   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.

i)   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  President
          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 and issue 700,000 common shares
          to a shareholder and officer of the Company.


                                       22
<PAGE>

                            CHINA HEALTH HOLDING INC.
                          (a development stage company)

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


10.  SUBSEQUENT EVENT


     On August 7, 2006,  the Company signed a Definitive  Acquisition  Agreement
     for the  purchase of 60% of Henan Furen  Huaiqingtang  Pharmaceuticals  Co.
     Ltd. for the total purchase price of $11,884,500 (RMB$95,000,000). Pursuant
     to the  agreement,  the parties  have  agreed to use their best  efforts to
     complete the transaction within 60 days from the date of the agreement.


                                       23
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.


     This quarterly report contains certain  forward-looking  statements  within
the  meaning of Section  27A of the  Securities  Act of 1933,  as  amended,  and
Section 21E of the  Securities  Exchange Act of 1934, as amended.  These include
statements  about our  expectations,  beliefs,  intentions or strategies for the
future,  which we indicate by words or phrases such as  "anticipate,"  "expect,"
"intend,"  "plan,"  "will," "we believe,"  "our company  believes,"  "management
believes" and similar language.  These  forward-looking  statements are based on
our current  expectations  and are subject to certain risks,  uncertainties  and
assumptions,  including those set forth in the following  discussion,  including
under the heading "- Risk  Factors".  Our actual  results may differ  materially
from  results  anticipated  in  these  forward-looking  statements.  We base our
forward-looking  statements  on  information  currently  available to us, and we
assume no  obligation  to update them.  In addition,  our  historical  financial
performance is not necessarily indicative of the results that may be expected in
the  future  and we  believe  that such  comparisons  cannot  be relied  upon as
indicators of future performance.

     To the extent  that  statements  in the  quarterly  report is not  strictly
historical,  including statements as to revenue projections,  business strategy,
outlook,  objectives,   future  milestones,  plans,  intentions,  goals,  future
financial  conditions,  future  collaboration  agreements,  the  success  of the
Company's  development,  events conditioned on stockholder or other approval, or
otherwise  as  to  future  events,  such  statements  are  forward-looking,  All
forward-looking  statements,  whether written or oral, and whether made by or on
behalf of the company, are expressly qualified by the cautionary  statements and
any  other  cautionary   statements  which  may  accompany  the  forward-looking
statements,  and are made pursuant to the safe harbor  provisions of the Private
Securities  Litigation  Reform  Act  of  1995.  The  forward-looking  statements
contained in this annual report are subject to certain  risks and  uncertainties
that could cause actual results to differ  materially from the statements  made.
Other  important  factors that could cause actual  results to differ  materially
include  the  following:  business  conditions  and the  amount of growth in the
Company's industry and general economy;  competitive factors; ability to attract
and retain personnel; the price of the Company's stock; and the risk factors set
forth from time to time in the Company's SEC reports,  including but not limited
to its annual report on Form 10-KSB;  its quarterly reports on Forms 10-QSB; and
any reports on Form 8-K. In addition,  the company  disclaims any  obligation to
update or correct any  forward-looking  statements in all the  Company's  annual
reports  and SEC  filings  to  reflect  events or  circumstances  after the date
hereof.


Overview

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

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


     1.   King of Herbs-based products;

     2.   Taoist Medicinal products; and

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


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


PRODUCTS

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

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


                                       24
<PAGE>

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


KING OF HERBS PRODUCT LINE


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

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


TAOIST MEDICINAL PRODUCT LINE

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

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

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

MULTI-VITAMINS AND SUPPLEMENTS

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


                                       25
<PAGE>
RECENT DEVELOPMENTS

Acquisition Agreement with Henan Furen Huaiqingtang Pharmaceuticals  Co. Ltd


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


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

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

Letter of Intent with WangJing  Hospital and WangJing  Hospital of China Academy
of Chinese Medical Sciences

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

     Pursuant  to the  Letter of  Intent,  the  parties  agreed  to  pursue  the
co-development  of the China  International  University of  Traditional  Chinese
Medicine and the University Hospital for Traditional Chinese Medical Sciences on
a worldwide  basis  during the five (5) year period  following  execution of the
Letter of Intent.  Further,  WangJing  Hospital and  WangJing  Hospital of China
Academy of Chinese Medical Sciences have agreed to provide the Company with full
intellectual  and  scientific  and  medical  and  technical  support for further
development of the Project,  while the Company has agreed to be responsible  for
further investment capital and business development for the Project. The Company
believes that the Project will allow it to bring the Traditional Chinese Medical
technologies  and  methods  utilized by  WangJing  Hospital of China  Academy of
Chinese  Medical  Sciences to other  universities  and  hospitals on a worldwide
basis.

Letter of Intent with Shaanxi WanAn Pharmaceutical Co. Ltd.

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

Letter of Intent  with Henan  Tiankang  Pharmaceuticals  Co. Ltd.

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

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


                                       26
<PAGE>
Letter of Intent with Shaanxi Meichen Pharmaceuticals, Ltd.

     On May 2, 2006, the Company  entered into a Letter of Intent,  effective as
of May 10, 2006, with Shaanxi Meichen  Pharmaceuticals Co. Ltd. for the proposed
acquisition by the Company of 51% or more of Shaanxi Meichen Pharmaceuticals Co.
Ltd. Pursuant to the letter of intent,  both parties have expressed their intent
and support for the cooperation and  accomplishment of the acquisition and merge
of Henan Tiankang Pharmaceuticals Ltd. by the Company.  Further, Shaanxi Meichen
Pharmaceuticals  Co.  Ltd.  has agreed to offer the Company  with first  refusal
rights and legal  exclusive  rights for  further  acquisition  of 51% or more of
Shaanxi Meichen  Pharmaceuticals  Co. Ltd. in the next 9 months from the date of
the signed Letter of Intent.

     Shaanxi   Meichen   Pharmaceuticals   Co.  Ltd.  is   certified  as  a  GMP
Pharmaceutical  Manufacturer  by  the  Peoples  Republic  of  China  State  Drug
Administrative  Agency.  Shaanxi Meichen  Pharmaceuticals  Co. 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.  Shaanxi Meichen  Pharmaceuticals Co. 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.  Shaanxi  Meichen
Pharmaceuticals  Co. Ltd. is the  surviving  entity  from the  restructuring  of
Shaanxi Meichen  Bioscientific,  Stock Co. Ltd. and Xianang Third Pharmaceutical
Factory in January  2003.  Each of the  foregoing  transactions  is subject to a
number of terms and conditions  including,  but not limited 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 companies,  and the completion and delivery of
audited  financial  statements of the companies.  There can be no assurance that
any  or  all of  the  proposed  transactions  will  be  completed  on the  terms
described, or at all.


RESULTS OF OPERATIONS


     We had a net loss of $786,558  for the three  months ended June 30, 2006 as
compared to a net loss of $317,831 for the three months ended June 30 2005.  The
net loss for the  three  months  ended  June 30,  2006  consisted  primarily  of
$276,210  of  consulting  fees,   $354,295  of  management   fees,   $68,778  of
professional fees, $16,454 of interest and bank charges, $7,291 in rent, $356 of
travel  expenses,  $15,291 of office  expenses,  $37,526 of  investor  relations
related travel costs, $1,338 in depreciation expenses, $3,280 of advertising and
promotional expenses,  and $5,003 of vehicle expenses.  The increase in net loss
for the three  months  ended  June 30,  2006 was the  result in an  increase  in
management fees, consulting fees, and professional fees.

     Other Income  (Expenses)  was $736 for the three months ended June 30, 2006
as compared to $6,999 for the three months ended June 30, 2005.  The decrease is
attributed  primarily to a loss on  settlement of debt and issuance of shares of
$9,192  recognized  during the three months ended June 30, 2005  compared to nil
for the three months ended June 30, 2006.

     We had a net loss of  $1,215,677  for the six months ended June 30, 2006 as
compared to a net loss of $2,086,820  for the six months ended June 30 2005. The
net loss for the six months ended June 30, 2006 consisted  primarily of $393,314
of consulting fees,  $523,833 of management fees, $130,415 of professional fees,
$37,793 of interest and bank charges $15,402 in rent, $3,912 of travel expenses,
$24,085 of office expenses,  $72,005 of investor relations  expenses,  $3,912 in
travel  costs,  $2,390  in  depreciation  expenses,  $3,280 of  advertising  and
promotional expenses,  and $8,109 of vehicle expenses.  The increase in net loss
for the six  months  ended  June 30,  2006 was  primarily  the  result  of in an
increase in management fees, consulting fees, and professional fees.

     Other Income  (Expenses)  was $1,139 for the six months ended June 30, 2006
as compared to $1,1376,475  for the six months ended June 30, 2005. The decrease
is  attributed  primarily to a loss on settlement of debt and issuance of shares
of $9,192 and impairment of licensing rights of $1,359,999 recognized during the
six months ended June 30, 2005 compared to nil for the six months ended June 30,
2006.

LIQUIDITY AND CAPITAL RESOURCES

     As of June 30, 2006, we had cash of $4,019.  Our current  liabilities as of
June 30,  2006  aggregated  $1,006,105.  As of June 30,  2006,  we had a working
capital  deficiency of $999,405 and an  accumulated  deficit of  $7,211,978.  In
order to sustain our current level of operations, we will need to raise at least
$ 1 million over the next six to twelve months. In order to expand our business,
fund future  development and begin marketing and selling our three product lines
and pursue our acquisition strategy, we will need to raise at least $ 25 million
over the next twelve to twenty-four  months.  We intend to seek outside debt and
equity financing,  to the extent that such funding is available under reasonable
terms and conditions.  We have not yet sought any commitments for such financing
and no assurance can be given that additional financing will be available, or if
available,  will be on  acceptable  terms.  If adequate  working  capital is not
available, we may be forced to curtail or cease operations.


                                       27
<PAGE>

     As of June 30, 2006, we had outstanding loans to our President  Julianna Lu
and Vice  President  XiaoFei  Yu,  and  Senior  Consultant  James H.  Simpson of
$772,548 and $164,394, and $30,533, respectively. There are no formal agreements
for when repayment of the loans must be made.  The loans accrue  interest at the
rate of 10% per annum.

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


Future Development

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

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

     The Company will be supported by two core, wholly owned subsidiaries:

     1.   China Health World  Pharmaceutical  Corporation,  which will  develop,
          manufacture  and  commercialize   natural   medications  for  epidemic
          diseases  and  conditions  related  to  mellitus,  cardiovascular  and
          cerebral-vascular system dysfunctions, and neurological disorders.

     2.   China Health World Trade  Corporation,  which will support the Company
          in  the  areas  of  worldwide  branding,   multimedia   marketing  and
          multi-channel distribution to global customers and markets.

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

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

     In the next 12 to 24  months,  We are  developing  a  proprietary  enhanced
Global Retail and Franchise  Infrastructure  and System to support the launch of
our global retail and franchising operations. The System is expected to be fully
operational  in about twenty four months.  The new Global Retail  Infrastructure
will  enable our  employees  to perform  global  customer  maintenance,  process
account payments and view a customer's sales history.

     As we attempt to grow, we intend to establish  regional  sales teams in the
United States and ultimately  internationally.  These sales teams will work with
distributors  and  retailers in their  regions to promote and sell our products.
Also, together with marketing and sales consultants we will attempt to develop a
marketing plan to promote our brand name and product lines worldwide. Currently,
we do not have  any  agreements  with  retail  or  wholesale  distributors.  Our
management will attempt to work to negotiate and enter into retail and wholesale
distribution  agreements for our products over the next six to twelve months. We
will also  attempt  to open  retail  outlets in large  cities in North  America,
Europe and the People's  Republic of China over the next five years. We have not
yet located any sites to establish retail stores,  but are initially looking for
locations in New York, Los Angeles,  San Francisco,  Seattle, Las Vegas or other
large cities in the United  States.  We  anticipate  that we will open our first
retail storefront in the United States within the next 12 to 24 months.

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


                                       28
<PAGE>
medicinal products,  as well as establishing a pharmaceutical drug pipeline,  to
full  distribution  and  marketing  across  PR  China,  therefore  substantially
increasing profit margins. Acquisitions should accelerate growth of revenues and
earnings.   A  strategic   combination  of  assets,   net  income,  an  enhanced
pharmaceutical  drug pipeline and technologies will accrete value to the Company
and its shareholders


     If we are  successful in raising $25 million in equity  financing to expand
our business and fund future development, we anticipate that we will utilize the
proceeds as follows  over the next twelve  months:  (a)  $150,000 to develop our
Internet website and e-commerce  system;  (b) $150,000 for media  advertising to
promote our brand name; (c) $200,000 for our research and  development  program;
(d)  $2,000,000  to  establish  our first  retail  outlet in the United  States,
including  an  integrated  inventory  management/  manufacturing/sales  computer
system;  (e)  $200,000  for an investor  relations  program;  (f)  $500,000  for
professional  and  consultant  fees;  and (g)  $1,800,000  for  general  working
capital,   including   product   development,   inventory,   and   general   and
administrative  expenses;  (f)$ 20 million to  complete  our  planned  strategic
acquisitions.  We do not expect to purchase or sell significant  equipment or to
significantly increase the number of our employees over the next twelve months.


     If we are only successful in raising $5 million of financing to sustain our
current level of business  operations,  we  anticipate  that we will utilize the
proceeds  as follows  over the next  twelve  months:  (a) $20,000 to develop our
Internet website and e-commerce  system;  (b) $200,000 for media  advertising to
promote our brand name;  (c) $60,000 for our research and  development  program;
(d)  $250,000-$400,000  to begin the process of  establishing  our first  retail
outlet in the United States; (e) $50,000 for an investor relations program;  (f)
$150,000-$250,000    for    professional    and   consultant   fees;   and   (g)
$200,000-$300,000  for general working capital,  including product  development,
inventory,  and general  and  administrative  expenses,  and (f) the balance for
completion of certain of the Company's proposed acquisition projects.


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


Research and Development

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


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


RISK FACTORS

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

RISKS RELATED TO OUR FINANCIAL CONDITION
----------------------------------------

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


     We  reported  net losses  totaling  of  $3,676,679,  $2,098,276,  $149,673,
December 31, 2005, December 31, 2004 and December 31, 2003, respectively.  As of
December  31, 2005 we had a working  capital  deficiency  of  $598,411  (current
assets less current liabilities) and an accumulated deficit of $5,996,301.  With
our  current  resources  we expect to be able to satisfy  our cash  requirements
through June 30, 2007. In order to expand our current business operations,  fund
future  development and market and sell our three existing product lines we will
need to raise  at least  $25  million  in  financing  over  the next  twelve  to
twenty-four months. We intend to raise additional working capital either through
private  placements,  public  offerings  and/or  bank  financing.  There  are no
assurances  that we will be able to  achieve  a level of  revenues  adequate  to
generate  sufficient  cash flow from operations or obtain  additional  financing
through private placements,  public offerings and/or bank financing necessary to
support our working  capital  requirements.  To the extent that funds  generated
from  any  private  placements,  public  offerings  and/or  bank  financing  are
insufficient, we will have to raise additional working capital. No assurance can
be given that additional financing will be available,  or if available,  will be
on acceptable terms.  These conditions raise substantial doubt about our ability
to continue as a going concern.  If adequate working capital is not available we
may be forced to discontinue operations, which would cause investors to lose the
entire amount of their investment.


                                       29
<PAGE>

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


     Based upon our current cash reserves and forecasted operations,  we believe
that we will need to obtain at least $1 million  of outside  funding in order to
sustain our current business operations over the next twelve months, at least $5
million  of  outside  funding  in order to  expand  our  business,  fund  future
development and market and sell our three existing  product lines,  and at least
$20  million  to  complete  our  planned  strategic  acquisitions.  Our need for
additional capital to finance our business strategy, operations, and growth will
be greater should, among other things,  revenue or expense estimates prove to be
incorrect. If we fail to arrange for sufficient capital in the future, we may be
required  to reduce  the scope of our  business  activities  until we can obtain
adequate  financing.  We may not be  able  to  obtain  additional  financing  in
sufficient  amounts or on acceptable  terms when needed,  which could  adversely
affect our  operating  results  and  prospects.  Debt  financing  must be repaid
regardless of whether or not we generate profits or cash flows from our business
activities. Equity financing may result in dilution to existing shareholders and
may involve  securities  that have rights,  preferences,  or privileges that are
senior to our common stock.


RISKS RELATED TO OUR BUSINESS
-----------------------------

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


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


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


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


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


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


                                       30
<PAGE>
we have no control over the manufacturing procedures used in connection with the
production of these third-party  products. We are in the process of applying for
product liability insurance. Such insurance, once obtained, may not be available
at a reasonable cost, or may not be adequate to cover liabilities.


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


     Over the next six to eighteen months,  we anticipate  launching our King of
Herbs,  Taoist  Medicinal and Vitamins and  Supplements  products lines upon the
receipt of funding.  We have not yet implemented any marketing and  distribution
strategies. Accordingly, we may experience a period of significant growth. While
we have not  experienced  problems with growth of our business in the past,  any
future growth could cause  significant  strain on our  managerial,  operational,
financial and other  resources.  Success in managing  this  expansion and growth
will depend,  in part, upon the ability of our senior  management to effectively
manage the growth of our business. Any failure to manage the proposed growth and
expansion of our business could have a material  adverse effect on our financial
condition and results of operations.

Our Strategy Of Growth Through Acquisition Is Inherently Risky.

     We  intend to seek to  identify  and  develop  merger  and/or  acquisitions
candidates in the Peoples  Republic of China and worldwide as part of our growth
plan to secure a strong  future.  Although we have signed a Letters of Intent to
acquire  WangJing  Hospital  and WangJing  Hospital of China  Academy of Chinese
Medical  Sciences,  Shaanxi  WanAn  Pharmaceutical  Co. Ltd. and Henan  Tiankang
Pharmaceuticals  Ltd.,  there  can be no  assurance  that  any  or  all of  such
acquisitions  will be completed.  Even if the  acquisitions  are completed,  the
final terms of the acquisition  agreements may vary substantially from the terms
described in this Offering Memorandum.

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

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

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


If We Fail To Acquire And Develop Other Products Or Product  Candidates,  We May
Be Unable To Grow Our Business.


     We license  the rights to a majority of our  products  from  outside  third
parties.  As part of our  growth  strategy,  we intend  to  license  or  acquire
additional    products   and   product    candidates   for    development    and
commercialization.  The  success of this  strategy  depends  upon our ability to
identify, select and acquire the right product candidates. Any product candidate
we  license or acquire  may  require  additional  development  efforts  prior to
commercial sale, including extensive clinical testing and approval by regulatory
authorities.  All product  candidates are prone to the risks of failure inherent
in product  development,  including the possibility  that the product  candidate
will not be shown to be sufficiently safe and effective.  In addition, we cannot
assure you that any products that we license or acquire will be  manufactured or
produced  economically,  successfully  commercialized  or widely accepted in the
marketplace.  Proposing,  negotiating and  implementing  an economically  viable
product  acquisition  or  license  is  a  lengthy  and  complex  process.  Other
companies,  including those with substantially greater financial,  marketing and
sales  resources,  may compete with us for the acquisition or license of product
candidates.  We may not be able to acquire or license  the rights to  additional
products on terms that we find acceptable, or at all.


If Our Relationships With Our Manufacturers  Terminate,  Or Their Facilities Are
Damaged Or Destroyed, We May Be Unable To Develop Or Commercialize Our Products.


     Currently, only a limited number of companies manufacture our products. The
number  of  contract  manufacturers  with  the  expertise,  required  regulatory
approvals and facilities to manufacture  our product  candidates on a commercial
scale is extremely  limited,  and it would take a significant  amount of time to
arrange  for  alternative  manufacturers.  If any of our  manufacturers  fail to
deliver the required commercial quantities of bulk substance or finished product
on a timely basis and at commercially  reasonable  prices,  and we are unable to
find  one  or  more  replacement   manufacturers  capable  of  production  at  a
substantially  equivalent cost, in substantially equivalent volumes and quality,
and on a timely basis,  we will likely be unable to meet  customer  demand as we
begin to market and sell our existing product lines.


The Loss Of Our Current  Management Team Could Have A Material Adverse Effect On
Our  Business.  If We Are Not  Able To  Retain  Additional  Key  Personnel,  Our
Business Could Suffer.


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


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<PAGE>
RISKS RELATED TO OUR INDUSTRY
------------------------------

The  Nutritional  Supplements  Industry Is Intensely  Competitive.  We Have Many
Well-Established  Competitors  With  Substantially  Greater  Financial And Other
Resources  Than  Us.  These  Factors  May  Make  It  More  Difficult  For  Us To
Successfully Implement Our Business Plan And May Adversely Affect Our Results Of
Operations.


     The  nutritional  supplements  industry is a large,  highly  fragmented and
growing industry,  with no single industry participant  accounting for more than
10% of total industry retail sales.  Participants  include specialty  retailers,
supermarkets,  drugstores,  mass merchants (wholesalers),  multi-level marketing
organizations, mail order companies and a variety of other smaller participants.
The  market  is also  highly  sensitive  to the  introduction  of new  products,
including various  prescription  drugs,  which may rapidly capture a significant
share of the  market.  Increased  competition  from  companies  that  distribute
through retail or wholesale channels could have a material adverse effect on our
financial  condition  and  results  of  operations.  Some  of the  nutraceutical
companies that we will compete with are Weider  Nutrition  International,  Inc.,
USANA Health  Sciences  Inc.,  Nature's  Sunshine  Products,  Inc. and Herbalife
International, Inc. We are a development stage business and the only revenues we
have received from product sales since inception were nominal and were generated
during 2004. Accordingly, we have not been operational long enough to experience
any of the above problems.  However,  since we are a development stage business,
most,  if not all  companies in our industry  have greater  financial  and other
resources  available  to  them  and  possess  manufacturing,   distribution  and
marketing  capabilities  greater than ours. In addition,  our competitors may be
more effective and efficient in integrating new products.  We may not be able to
compete  effectively  and  any of the  factors  listed  above  may  cause  price
reductions, reduced margins and difficulties in gaining market share.


Compliance With Governmental  Regulations May Impose Additional Costs, Which May
Adversely Affect Our Financial Condition And Results Of Operations.


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


     The FDA may attempt to regulate  any of our  products  that fall within its
jurisdiction,  and the FTC has  jurisdiction  to regulate the advertising of our
products that fall within its jurisdiction.  The FDA may not accept the evidence
of safety for any new ingredients that we may want to market, may determine that
a particular product or product ingredient presents an unacceptable health risk,
may determine that a particular statement of nutritional support that we want to
use is an unacceptable  drug claim or an unauthorized  version of a food "health
claim," may determine  that a particular  product is an unapproved  new drug, or
the FDA or the FTC may  determine  that  particular  claims  are not  adequately
supported by available scientific  evidence.  Such a determination would prevent
us from marketing particular products or using certain statements of nutritional
support on our products.  One of the key areas of our  development  focus is the
specialty  supplements  category,  which includes  products that are directed at
particular  nutritional  concerns.  The FDA may not agree with our statements of
nutritional  support as to a  particular  specialty  supplement  or permit us to
promote our specialty  supplements directed at particular  nutritional concerns.
We also may be unable to disseminate  third-party  literature in connection with
our  products  if  the   third-party   literature   fails  to  satisfy   certain
requirements.  In  addition,  the FDA could  require  us to remove a  particular
product from the market. Any future recall or removal would result in additional
costs to us,  including  lost revenues from any products that we are required to
remove from the market, any of which could be material. Any such product recalls
or  removals  could lead to  liability,  substantial  costs and  reduced  growth
prospects.


     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


                                       32
<PAGE>
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.

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

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

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

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

ITEM 3. CONTROLS AND PROCEDURES.

     a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. As of the 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.


                                       33
<PAGE>
                                     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 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.

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.  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.

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.  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.  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.

All of the foregoing  issuances were exempt from registration under Section 4(2)
of  the  Securities  Act  and/or  Regulation  S,  promulgated  pursuant  to  the
Securities  Act. None of the purchasers who received  shares under  Regulation S
are U.S. persons as defined in Rule 902(k) of Regulation S, and no sales efforts
were  conducted in the U.S., in  accordance  with Rule 903(c).  Such  purchasers
acknowledged  that the securities  purchased must come to rest outside the U.S.,
and the  certificates  contain a legend  restricting the sale of such securities
until the Regulation S holding period is satisfied.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


31.1    Certification  by  Chief  Executive   Officer/Chief  Financial  Officer,
        required  by Rule  13a-14(a)  or Rule  15d-14(a)  of the  Exchange  Act,
        promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1    Certification  by  Chief  Executive   Officer/Chief  Financial  Officer,
        required by Rule  13a-14(b)  or Rule  15d-14(b)  of the Exchange Act and
        Section  1350 of  Chapter  63 of Title  18 of the  United  States  Code,
        promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


                                       34
<PAGE>
                                   SIGNATURES

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




Dated:  August 18, 2006
                            China Health Holdings, Inc.



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


                                       35