UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB



| |  | QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| |  | ---------------------------------------------------------------------------------

| | For
the quarterly period ended:  March 31, 2007
| | -----------------------------------------------



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



Commission file number:000-50911

CHILCO RIVER HOLDINGS INC.

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



|Nevada(State or other jurisdiction ofincorporation or organization) | 98-0419129(I.R.S. EmployerIdentification No.)
|------------------------------------------------------------------- | ---------------------------------------------



|355 Lemon Avenue, Suite CWalnut, CA 91789(Address of principal executive offices) | 91789(zip code)
|--------------------------------------------------------------------------------- | ---------------



Issuers Telephone Number:(909) 869-7933

Check whether the issuer (1) 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.

YesXNo

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

Yes         NoX

As of March 31, 2007, there were 48,345,600 shares of common stock outstanding.

Transitional Small Business Disclosure Format (check one)

Yes         NoX









---







CHILCO RIVER HOLDINGS INC.
FORM 10-QSB 
TABLE OF CONTENTS





Part I  FINANCIAL INFORMATION





|Item 1 | Unaudited Condensed Consolidated Financial Statements     | 1
|------ | --------------------------------------------------------- | -
|       | Condensed Consolidated Balance Sheet as of March 31, 2007 | 1

Condensed Consolidated Statement of Operations for three

| | months ended March 31, 2007 and 2006 of Operations | 2
| | -------------------------------------------------- | -

Condensed Consolidated Statement of Cash Flows for three months

| | ended March 31, 2007 and 2006 | 3
| | ----------------------------- | -

| | Notes to Unaudited Condensed Consolidated Financial Statements | 4
| | -------------------------------------------------------------- | -



|Item 2 | Managements Discussion and Analysis or Plan of Operation | 13
|------ | --------------------------------------------------------- | --



|Item 3 | Controls and Procedures | 24
|------ | ----------------------- | --



PART II  OTHER INFORMATION



|Item 1 | Legal Proceedings | 24
|------ | ----------------- | --



|Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 24
|------ | ----------------------------------------------------------- | --



|Item 3 | Defaults Upon Senior Securities | 24
|------ | ------------------------------- | --



|Item 4 | Submission of Matters to a Vote of Security Holders | 25
|------ | --------------------------------------------------- | --



|Item 5 | Other Information | 25
|------ | ----------------- | --



|Item 6     | Exhibits | 25
|---------- | -------- | --
|SIGNATURES | 27      





i



---





PART I  FINANCIAL INFORMATION

|Item 1. | Financial  Statements.
|------- | ----------------------



CHILCO RIVER HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS 
(Expressed in US$)

|                                                            | March 31, 2007
|----------------------------------------------------------- | --------------
|                                                            |               
|ASSETS                                                      |               
|Current Assets                                              |               
|Cash                                                        |               
|Accounts receivable, net of allowance for doubtful accounts |               
|of $nil as of March 31, 2007                                |               
|Deposit receivable                                          |               
|Supplies inventory                                          |               
|Prepaid expense & other current assets                      |               
|Prepaid income taxes                                        |               
|VAT tax recoverable                                         |               
|                                                            |               
|Total Current Assets                                        |               
|                                                            |               
|Property, furniture & equipment,                            |               
|net of accumulated depreciation of $7,395,656               |               
|as of March 31, 2007                                        |               
|                                                            |               
|Intangible Asset                                            |               
|Security deposit & prepaid contract                         |               
|                                                            |               
|Total Other Assets                                          |               
|                                                            |               
|TOTAL ASSETS                                                |               
|                                                            |               
|LIABILITIES AND STOCKHOLDERS EQUITY                        |               
|Current Liabilities                                         |               
|Accounts payable                                            |               
|Accrued expenses and other payables                         |               
|Installment payable - current portion                       |               
|Loan from affiliates                                        |               
|Customer deposit                                            |               
|Deferred tax liabilities                                    |               
|                                                            |               
|Total Current Liabilities                                   |               
|                                                            |               
|Long Term Liabilities                                       |               
|Installment payable - long term                             |               
|                                                            |               
|Total Long Term Liabilities                                 |               
|                                                            |               
|TOTAL LIABILITIES                                           |               
|                                                            |               
|Shareholders Equity                                        |               
|Common stock: no par value, unlimited authorized            |               
|shares, 48,345,600 shares issued and outstanding            |               
|Additional paid-in capital                                  |               
|Subscription receivable                                     |               
|Prepaid stock compensation                                  |               
|Accumulated deficits                                        |               
|Accumulated Foreign Currency Adjustment                     |               
|                                                            |               
|Total Shareholders Equity                                  |               
|                                                            |               
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                  |               
|                                                            |               

(Unaudited  See Accompanying Notes)

1



---







CHILCO RIVER HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in US$)

|                                         | Quarter Ending
March 31
|---------------------------------------- | -----------------------
|
|                                         |                        
|Revenues                                 |                        
|Slot machine leasing                     |                        
|Rooms                                    |                        
|Food and beverage                        |                        
|                                         |                        
|                                         |                        
|                                         |                        
|Less: Promotional Allowances             |                        
|                                         |                        
|Total Revenues                           |                        
|                                         |                        
|Operating Expenses                       |                        
|Operating departments                    |                        
|General and administrative               |                        
|Depreciation & Amortization              |                        
|                                         |                        
|Total Operating Expenses                 |                        
|                                         |                        
|Income (Loss) from Operations            |                        
|                                         |                        
|Other Income and Expenses                |                        
|Interest income                          |                        
|Other income/gains                       |                        
|Interest expense                         |                        
|                                         |                        
|                                         |                        
|                                         |                        
|Income (Loss) before income tax          |                        
|Benefit (Provision) for income tax       |                        
|                                         |                        
|Net Income (Loss)                        |                        
|                                         |                        
|Other Comprehensive Income               |                        
|Unrealized gain (loss) on                |                        
|Foreign Currency Translation, net of tax |                        
|                                         |                        
|Total Comprehensive Income               |                        
|                                         |                        
|Basic Earnings Per Share                 |                        
|Diluted Earnings Per Share               |                        
|Weighted Average Shares Outstanding      |                        
|Diluted Average Shares Outstanding       |                        



(Unaudited  See Accompanying Notes)

2



---







CHILCO RIVER HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in US$)

|                                                  | For the Quarter
Ended March 31
|------------------------------------------------- | ------------------------------
|
|                                                  |                               
|Cash Flows from Operating Activities              |                               
|Net Income (Loss)                                 |                               
|Adjustments to reconcile net income to cash flows |                               
|from operating activities                         |                               
|Depreciation & amortization                       |                               
|Loss on disposition of assets                     |                               
|Prepaid expense via stock issuance                |                               
|Interest expense on installment obligations       |                               
|Amortization of service contract                  |                               
|(Increase)/Decrease in account balances of:       |                               
|Accounts receivable                               |                               
|Deposit receivable                                |                               
|Supplies inventory                                |                               
|Prepaid expense & other current assets            |                               
|VAT Recoverable                                   |                               
|Deferred tax assets                               |                               
|Prepaid contract and security deposit             |                               
|Accounts payable                                  |                               
|Customer Deposit                                  |                               
|Accrued expenses and other payables               |                               
|Foreign Taxes Payable                             |                               
|                                                  |                               
|Cash Flows from Operating Activities              |                               
|                                                  |                               
|Cash Flows From Investing Activities              |                               
|Purchase of properties and equipments             |                               
|Cash paid for construction in progress            |                               
|Payment toward installment obligation             |                               
|                                                  |                               
|Cash From Investing Activities                    |                               
|                                                  |                               
|Cash Flows from Financing Activities              |                               
|Cash proceeds from shareholder loans              |                               
|Net cash repayment for affiliate loans            |                               
|Cash proceeds from subscribed capital             |                               
|Cash proceeds from warrants exercise              |                               
|                                                  |                               
|Cash From Financing Activities                    |                               
|                                                  |                               
|Effect of exchange rate changes on cash           |                               
|balances held in foreign currencies               |                               
|                                                  |                               
|Net Change in cash and cash equivalents           |                               
|                                                  |                               
|Cash and cash equivalents at the                  |                               
|beginning of year                                 |                               
|                                                  |                               
|Cash and cash equivalents at the                  |                               
|end of year                                       |                               
|                                                  |                               
|Supplemental Disclosure Information               |                               
|Cash paid during the year for interest            |                               
|Cash paid during the year for income taxes        |                               

(Unaudited  See Accompanying Notes)



3



---







Chilco River Holdings, Inc.

Notes To The Consolidated Financial Statements

March 31, 2007

Unaudited

Preliminary Note

The accompanying condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the SEC). Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. In the opinion of the management, the accompanying interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation have been included. The results of operations for the three-month period ended March 31, 2007, are not necessarily indicative of the results for a full-year period. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Companys annual audited
financial statements for the year ended December 31, 2006.



|1. | Business Organization and Reorganization
|-- | ----------------------------------------



Chilco River Holdings, Inc. (CRH, or the Company) was incorporated in the State of Nevada on May 8, 2003.  The Company acquired a 100% interest in 16 mineral claim units located in British Columbia, Canada in November 2003.  After the completion of a preliminary exploration report on the claim, the Company suspended mineral exploration efforts.  The Company abandoned these properties in 2005.



Bruce Grupo Diversion SAC (BGD) was formed on March 1, 1996 and registered at the Registry for Legal Persons of Lima, Peru on April 28, 1996.  BGD owned a fourteen-story building and a four-story adjacent structure that are operated as a casino and a hotel (the Miramar Hotel and Casino, formerly known as Bruce Hotel and Casino). Miramar Hotel and Casino is licensed to operate slot machines, a night club, discothèques, and a restaurant.  As of February 2005, the casino consisted of traditional gaming tables (blackjack, roulette, craps and poker) in the second floor (the gaming floor) of the main building and of about 220 slot machines in the ground floor (the slot room).



Kubuk International, Inc. (KII or Kubuk International) is a California corporation and was incorporated on January 7, 2002.  The majority shareholders of KII also control 99% of total voting stock of BGD.



Kubuk Investment S.A.C. (KISAC) was formed in year 2001 by the majority shareholders of KII in Peru.  KIIs majority shareholders also formed Kubuk Gaming S.A.C. (KGSAC) in year 2005 in Peru.



Starting on August 4, 2001, BGD and KISAC entered into a series of sale and purchase agreements (the Sale and Purchase Agreements) of the hotel assets and certain casino properties owned and operated by BGD for purpose of transferring these properties to KISAC.  Total consideration for all Sale and Purchase Agreements was in the amount of S/. 62,970,744 (US$19,357,745 using spot rate of 3.253:1 on May 21, 2005). On May 21, 2005, all assets subject to the scope of the sale and purchase agreements were transferred to and received by KISAC, which then commenced to carry on the hotel lodging businesses of Miramar Hotel and Casino.  The only assets that were transferred to KISAC are the assets as listed under Property, Furniture, and



4



---





Equipment on the balance sheet.  All other assets and liabilities were retained by BGD, which was subsequently dissolved in 2006.  The accounting treatment used by KISAC to record the transfer of the assets followed the guidance for transactions between entities under common control as described inSFAS 141, Business Combinations.This standard requires that the receiving entity use the carrying amount of the assets of the transferring entity.  Therefore, no fair market value adjustments were made to the transferred assets.  Furthermore, in accordance with Article 11-01(d) of Regulation S-X, this transaction was treated as a business acquisition since the revenue-producing activity remained generally the same as before the transaction.  Specifically, KISAC retained the following:  physical facilities, employee base, customer base,
operating rights, operation techniques, and trade name.



The gaming floor of Miramar Hotel and Casino has been temporarily closed for renovation since March 2005.  During the renovation, BGD continued to operate slot machines in the casino until July 1, 2005, when MINCETUR, the gaming authority of Peru, issued gaming licenses to KGSAC. KGSAC then took over the slot machine operations and conducts all other gaming activities of Miramar Hotel and Casino until the renovation project is completed.  In anticipation of the start of the planned renovation, the Company suspended the slot room operation and closed the restaurant to the general public in November 2005.  As of March 31, 2007, the Companys operations are limited to (i) hotel lodging and leasing of the slot machines retired from the former Bruce Casino by KISAC, and (ii) leasing of the new Kubuk brand slot machines by KGSAC.  The Company plans to reopen Miramar in August
2007, provided that sufficient capital is raised to complete the renovations in progress.



On June 15, 2005, KII and the shareholders of KISAC and KGSAC entered into an Agreement and Plan of Reorganization (the Reorganization Agreement), under which KII issued 50,920,000 shares of common stock to the shareholders of KISAC and KGSAC in exchange for their entire ownership holdings of KISAC and KGSAC.  As of June 30, 2005, both KISAC and KGSAC were 100% owned by KII.



On July 15, 2005, CRH entered into a share exchange agreement (the Kubuk Share Exchange Agreement) with KII and certain representatives of its shareholders.  Under the terms of the Kubuk Share Exchange Agreement, CRH agreed to acquire all of the issued and outstanding capital stock of KII from KIIs shareholders.  On August 3, 2005, CRH completed the acquisition of KII in accordance with the terms of the Kubuk Share Exchange Agreement by issuing 38,500,000 (post-split) Exchange Shares to shareholders of KII as consideration.  KII had 51,000,400 shares of common stock issued and outstanding at the time of acquisition.  KII shareholders received 0.3749970588 Exchange Shares for each share of KII common stock tendered.  In connection with the closing of the Share Exchange, the founding shareholder and two former officers and directors of CRH agreed to contribute an
aggregate of 7,928,000 (post-split) shares of the CRH common stock to the Company as an additional capital contribution.  The shares were cancelled effective as of August 3, 2005.



The Company established a software development center in Shenzhen, China in April 2006 for the purposes of developing an online poker software and other devices related to online gaming activities.  The Company intends to, after the software development becomes successful, license out the online gaming software to interested third parties for conducting online gaming activities outside of the United States.  The Company has applied to the local government for the foreign business branch office status for its Chinese software development center.



|2. | Significant Accounting Policies
|-- | -------------------------------



| | (a) | Principles of Consolidation
| | --- | ---------------------------



The financial statements include the accounts of CRH and KII, as well as the accounts of the latters wholly-owned Peruvian subsidiaries, KISAC and KGSAC, formerly Bruce Grupo Diversion SAC.  All significant inter-company balances and transactions have been eliminated in consolidation.





5



---







| | (b) | Use of Estimates
| | --- | ----------------



The preparation of the Companys financial statements in conformity with generally accepted accounting principles in the United States requires management of the Company to make certain estimates and assumptions.  These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.



| | (c) | Cash and Cash Equivalents
| | --- | -------------------------



The Company considers all highly liquid debt instruments purchased with a maturity of three months or less when purchased to be cash equivalents.



| | (d) | Accounts Receivable
| | --- | -------------------



Trade receivables, including casino and hotel receivables, are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful accounts is maintained to reduce the Companys receivables to their carrying amount, which approximates fair value. The allowance is estimated based on specific review of customer accounts as well as historical collection experience and current economic and business conditions.



| | (e) | Revenue Recognition and Promotional Allowances
| | --- | ----------------------------------------------



Casino revenue is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs (casino front money) and for chips in the customers possession (outstanding chip liability).  Hotel, food and beverage, entertainment and other operating revenues are recognized as services are performed.



In accordance with industry practice, the retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenue and then deducted as promotional allowances.  There was no promotional allowance for the quarter ended March 31, 2007 as all casino and slot machine operations are temporarily suspended for renovation.



Revenues from slot machine rentals are recognized as earned either on a daily fixed-rate basis under the related rental contracts with customers or under profit-sharing arrangements based on net winnings reported by the customer-lessee.  All leasing revenue is generated from slot machine rentals that are accounted for as operating leases.  The rentals have no defined length of contract, but are on a month-to-month basis.



| | (f) | Income Taxes
| | --- | ------------



Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax basis of assets and liabilities and their reported amounts in the financial statements.  Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed inSFAS No. 109, Accounting for Income Taxes.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.  A valuation allowance is recognized if it is more likely than
not that some portion or all deferred tax asset will not be realized.  Deferred income tax asset and liability balances are netted, as applicable, when they represent deferred amounts within the same taxing jurisdiction.





6



---







| | (g) | Basic and Diluted Earnings (Loss) per Share
| | --- | -------------------------------------------



Basic  earnings  per share of common  stock were  computed  by  dividing  income
available  to common  stockholders,  by the  weighted  average  number of common
shares  outstanding,  net of common  stock  held in the  treasury  for the year.
Diluted  earnings  per  share  were  computed  using  the  treasury  stock
method  underSFAS  No.  128  Earnings  per
Share.  As the Company has a loss for the quarter
ended March 31, 2007 the potentially  dilutive shares are  anti-dilutive and are
thus not added into the  earnings per share  calculation.  As of March 31, 2007,
there were 666,666  potentially  dilutive shares as a result of outstanding Class  A   Warrants.



| | (h) | Supplies Inventories
| | --- | --------------------



Supplies inventories are presented at adjusted cost or market value, whichever is lower.  Cost is established based on either the first-in, first-out assumption or, in certain cases, specific identification method.



| | (i) | Property, Plant and Equipment
| | --- | -----------------------------



Property, plant and equipment are stated at the historical cost.  Depreciation is calculated based on straight-line method over the properties estimated useful lives, which range from 5 to 7 years for machinery and equipment and 39 years for building and building improvements.  Betterment or improvements to properties are capitalized to properties, plant and equipment accounts.  Repairs and maintenance costs are charged to expense accounts.



Certain long-lived assets of the Company are reviewed at least annually as to whether their carrying values have become impaired in accordance withSFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.  Management considers assets to be impaired if the carrying value exceeds the undiscounted projected cash flows from operations.  If impairment exists, the assets are written down to their fair value or the projected discounted cash flows from related operations.



| | (j) | Intangibles
| | --- | -----------



The Company adopted the rules set forth inSFAS No. 142, Goodwill and Other Intangible Assets, to account for its intangible assets acquired under the licensing agreement with third parties.  The intangible assets acquired are initially recorded at their fair value.  The intangibles with finite useful lives are amortized over their lives.  Intangible assets with indefinite useful lives are not amortized and are examined at least annually to determine whether events and circumstances continue to support an indefinite useful life.  All intangible assets are reviewed annually for impairment.  If the fair value of an intangible is determined to be below its carrying amount, the intangible is written down to its fair value.



| | (k) | Concentration of Credit Risk
| | --- | ----------------------------



The Company maintains substantially all of its day-to-day operating cash balances with Peruvian commercial banks and a California bank. Deposits with the California bank are insured by Federal Deposit Insurance Corporation (FDIC) up to $100,000 per depositor.  As of March 31, 2007, the Company had an exposure in the amount of $77,797 that exceeded the FDIC insurance coverage.



In Peru, bank accounts and deposits with all financial institutions are insured by Fondo de Segiro de Deposito (FSD) up to S/. 75,742 (or $22,767, based on the current exchange rate of $3.3269:1 as of March 31, 2007).  The Company has 4 Peruvian bank accounts and an exposure in the amount of $396,658 that exceeded the FSD insurance coverage as of March 31, 2007.



| | (l) | Shares-Based Compensation
| | --- | -------------------------



In December  2004,  the  Financial  Accounting  Standards  Board  (FASB)  issuedSFAS No. 123R, Share Based Payment.SFAS  123Ris a
revision ofSFAS No. 123 Accounting for Stock-Based
Compensation, and



7

---







supersedesAPB Opinion No. 25, Accounting for Stock
Issued to Employees and its related implementation
guidance.SFAS  123Restablishes
standards for the accounting for  transactions in which an entity  exchanges its
equity  instruments  for goods or services.  It also addresses  transactions  in
which an entity  incurs  liabilities  in exchange for goods or services that are
based on the fair value of the entitys  equity  instruments or that may be
settled by the issuance of those equity instruments.SFAS
123Rfocuses primarily on accounting for transactions in
which an entity obtains employee services in share-based  payment  transactions.SFAS  123Rdoes not change the
accounting guidance for share-based payment transactions with parties other than
employees provided inSFAS 123as
originally issued andEmerging  Issues Task Force Issue
No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than
Employees  for   Acquiring,   or  in   Conjunction   with   Selling,   Goods  or
Services.   SFAS   123Rdoes  not  address  the
accounting  for  employee   share   ownership   plans,   which  are  subject  toAICPA Statement of Position 93-6,  Employers
Accounting for Employee Stock Ownership Plans.  SFAS  123Rrequires  a public  entity to  measure  the cost of  employee  services
received in exchange for an award of equity  instruments based on the grant-date
fair value of the award (with limited exceptions).  That cost will be recognized
over the period  during  which an employee  is  required  to provide  service in
exchange for the award  the requisite  service period (usually the vesting
period).SFAS 123Rrequires that
the compensation cost relating to share-based payment transactions be recognized
in the financial statements.  That cost will be measured based on the fair value
of the equity or  liability  instruments  issued.  The scope ofSFAS  123Rincludes a wide range of share-based
compensation  arrangements  including  share  options,  restricted  share plans,
performance-based awards, share appreciation rights, and employee share purchase
plans. The Company has adopted the provisions underSFAS
123Ras of January 2006.  There is no effect on the
financial  statements  as  a  result  of  adoptingSFAS
123Ras  of  March  31,  2007,  since  there  are  no
compensatory stock options outstanding.



| | (m) | Impact of New Accounting Standards
| | --- | ----------------------------------



In June 2003, the SEC adopted final  rules  under  Section  404 of the  Sarbanes-Oxley  Act of  2002 (Section  404). The SEC issued a final rule under Release 33-8760 on December  15, 2006 to extend the due dates for the implementation of provisions under Section 404 for certain small public companies. Under the SEC rule,  the Company is required to include in its annual and quarterly filings a report of management  on the  Company's internal control over  financial  reporting  starting with fiscal years ending after December 15, 2007.  The internal control report must include a statement of management's responsibility for establishing  and maintaining adequate internal control over financial reporting for the Company; of management's  assessment of the effectiveness of the Company's  internal control over financial reporting as of year end; and of the framework used by
management to evaluate the effectiveness of the  Company's  internal  control  over  financial  reporting.  The Company's independent accounting firm will have to issue an attestation report on  management's assessment of the Company's internal control over financial reporting as part of the SEC filings starting with fiscal years ending after December 15, 2008.



In  September  2006,  the  FASB  issued  SFAS  No.  157,  Fair  Value Measurements,  which defines fair value,  establishes a framework for using fair  value to  measure  assets  and  liabilities,  and  expands disclosures  about  fair value  measurements.  The  Statement  applies whenever other  statements  require or permit assets or liabilities to be measured at fair value.  SFAS No. 157 is effective for fiscal years beginning  after November 15, 2007. The impact of our adoption of SFAS No. 157 has not yet been determined.



8



---









| | (n) | Value Added Tax Recoverable
| | --- | ---------------------------



According to sales tax laws in Peru, a Peruvian entity is allowed to offset sales tax paid to vendors with sales tax received from their customers, prior to remitting the sales tax received to the local jurisdiction.  The asset balance represents sales tax paid to vendors that is expected to be offset against future sales tax received during the one year period following the balance sheet date.



| | (o) | Dividends
| | --- | ---------



The Company accrues for declared dividends which are not yet paid. As of the balance sheet date, there were no dividends which were declared and unpaid. All dividends occurred prior to the date of the Kubuk Share Exchange Agreement.



|3. | Foreign Currency Transactions
|-- | -----------------------------



The Company conducted its gaming business at Miramar Hotel & Casino in both US Dollars and the Peruvian Nuevo Soles.  The hotel and other business activities are operated using both US Dollars and the Nuevo Soles.  The functional currency of the Peruvian subsidiaries is the Nuevo Soles, whereas the functional currency of the US parent is the US dollar.  Account balances on the balance sheet are translated into US Dollars equivalents using the spot rate of 3.3269:1 on March 31, 2007, while the results of operations are translated into US Dollars equivalents using 3.2942:1, the weighted average exchange rates for the quarter ended March 31, 2007.



|4. | Related Party Transactions
|-- | --------------------------



The Company  incurred $33,848 of cash  expenditures at its software  development
center in Shenzhen,  China during the quarter ended March 31, 2007. All of these
Shenzhen  expenditures  have been  advanced  by a director  of the  Company.  No
interest has been accrued for the amount  advanced.  The outstanding  balance of
the advance amounted to $127,717 as of March 31, 2007 and is payable on demand.



The Company borrowed $250,000 from a shareholder  (Shareholder A) by executing a
promissory  note in favor of the lending  shareholder  on December 14, 2006. The
note bears an annual  interest  rate of 8%. The entire  principal  and  interest
incurred thereon are due on June 11, 2007. Shareholder A owns between 5% and 10%
of the Companys common stock as of March 31, 2007.



The  Company  also  borrowed an  interest-free  loan of  $300,000  from  another
shareholder  (Shareholder  B) by  executing  a  promissory  note in favor of the
lending  shareholder on December 27, 2006. The entire  principal  becomes due on
June  27,  2007.  Shareholder  B owns  more  than 5% but  less  than  10% of the
Companys common shares as of March 31, 2007.



|5. | Issuance of Common Stock and Warrants
|-- | -------------------------------------

On January 18,  2007,  the board of  directors  resolved  to amend the  purchase
warrant  certificate  for each Class A Warrant  (issued in  connection  with the
units sold in the  December 17, 2005 private  placement)  to purchase  shares of
common stock until 5:00 p.m.  (California time) on January 20, 2007 to lower the
exercise price per share to $0.40 and to extend the exercise period to 5:00 p.m.
(California time) on February 20, 2007. Before the amendment, the exercise price
of the Warrants was $1.00  (split-adjusted).  During the quarter ended March 31, 2007,
the Company received $199,040 as a
result of the  exercise of 497,600  Class A Warrants prior to
the  end  of  the   extended   re-price
period.





9



---







|6. | Cancellation of Shares
|-- | ----------------------



During the third quarter ended December 31, 2005, we issued a notice of default under the terms of the Escrow Agreement related to an aggregate of 4,000,000 (post-split) shares of common stock placed into escrow in connection with the Share Exchange.  Kubuk International, Inc. had obligations to Nefilim Associates, LLC, a Massachusetts limited liability company, T Morgan LLC, a Delaware limited liability company, and Sean Sullivan to issue capital stock of Kubuk or an entity acquired by or acquiring Kubuk upon satisfaction of certain conditions under the terms of Consulting Agreements, dated May 9, 2005 with respect to Sean Sullivan, May 19, 2005 with respect to Nefilim Associates, LLC and June 1, 2005 with respect to T Morgan LLC. Under the terms of the Share Exchange, the shareholders of Kubuk agreed to place the shares into escrow to satisfy the obligations of Kubuk under the Consultant Agreements.



We failed to raise a total of $5,000,000 in financing within thirty days of receiving the Kubuk audited financial statements, which resulted in the release of the escrowed shares. The 4,000,000 (post-split) shares were tendered to our company for cancellation and cancelled during the quarter ended March 31, 2006.



|7. | Share-Based Consulting Payment
|-- | ------------------------------



The Company  entered into a Consulting  Agreement  with Clear  Channel Inc. (the
Clear  Channel  Agreement)  on December  29,  2005.  Under the Clear
Channel  Agreement,  the  Company  retained  Clear  Channel  Inc. to provide the
Company with strategic  marketing and business planning  consulting services and
to assist the Company in developing corporate  governance  policies,  recruiting
qualified  officers and director  candidates and developing a corporate  finance
strategy  during  the  period  of three  years  from the date of the  agreement.
Pursuant to the terms of the Clear  Channel  Agreement,  the Company  paid Clear
Channel Inc. a consulting fee of one million shares of common stock,  which were
issued on February 14, 2006.  The fair value of the shares  issued in connection
with the Clear Channel Agreement, which is recognized as a separate component of
stockholders  equity  as  of  December  31,  2005,  is  determined  to  be
$1,380,000  and is amortized as consulting  expense from January 1, 2006 through
December 31, 2008 as services are  provided.  Fair value of the shares was based
on the unit price less the fair value of the  warrants.  The total  amortization
during the quarter ended March 31, 2007 was $115,000,  which was recognized in
general and administrative expense.

|8. | Licensing Rights
|-- | ----------------



On July 7, 2006 (the Effective Date) the Company entered into a License Agreement (the KC License Agreement) with K.C. Technology, a Hong Kong corporation (KC), under which the Company acquired from KC a worldwide exclusive and perpetual license to use KCs technology to manufacture, market and distribute KC designed slot machines and other gaming products, including an electronic data transfer device trademarked Smartbook (collectively, the Technology). The Technology includes all technology, tools, design, components, hardware, software, and specification necessary for the design and manufacturing of slot machines and Smartbook and all associated patents, trademarks, copyrights, trade secrets, and know-how.

The  Company  agreed  to pay KC a cash  license  fee of  $2,500,000,  of  which,
$500,000 was paid by July 15,  2006,  and the balance will be paid in four equal
installments  of  $500,000  each at the end of January  and June,  respectively,
during the  following  two years  (the  installment  payments).  The
Company also agreed to pay KC a licensee fee in common stock of 6,000,000 shares
of restricted post-split common stock, par value $0.001, of which 3,000,000 were
issued  within seven days of the Effective  Date,  1,500,000 to be issued on the
first  anniversary of the date of the Effective Date, and 1,500,000 to be issued
on  the  second  anniversary  of  the  Effective  Date  (the   installment
shares).  The Company granted KC registration  rights and undertook to use
commercially  reasonable effort to file a registration statement with the United
States  Securities  Commission  within 90 days of the Effective Date to register
for resale the first  3,000,000  shares  common  stock issued to KC under the KC
License  Agreement.  The Company will also pay a royalty of $20.00 for
each Smartbook sold by the Company under the KC License  Agreement.  The Company
made the required installment payment of $500,000 in January 2007.



10



---







The Company recorded the value of licensing rights acquired as intangible assets under SFAS No. 142, Goodwill and Other Intangible Assets. The majority portion of licensing rights acquired are not subject to amortization. However, 10% of the total value of the licensing rights is identified as service contract that is amortizable over the 2-year term of the KC License Agreement.  Total valuation of the rights and service contract acquired from KC is determined to be $8,969,473, which includes (1) the $500,000 payment made on July 15, 2006; (2) the fair market value of the 3,000,000 shares issued to KC Technology on the Effective Date, using the closing price quoted at $1.225 per share; (3) discounted present value of the installment payments with imputed interest rate at 12% per annum; and (4) fair value of the installment shares, calculated based on the present value of estimated share
prices at the future issuance dates. The estimated share prices at the issuance dates are assumed to be the same as $1.225 per share. The present value of the share prices are also discounted with an imputed interest rate of 12% per annum. Total discount, which will be amortized and recognized as interest expense over the term using the interest method, on the installment payments and installment shares as of March 31, 2007 was $450,507.

The amortization schedule for the service contract is as follows:

|2007  | $448,474
|----- | --------
|2008  | 112,118 
|Total | $560,592

Total amortization  during the quarter ended March 31, 2007 was $112,118,  which
was   recognized   in   general   and   administrative   expense.

|9. | Subsequent Events
|-- | -----------------

On April 19, 2007, the Company entered into a placement agency agreement (the Chung Lien Agency Agreement) with Chung Lien Investment Management Limited, a Hong Kong corporation (Chung Lien), by which the Company engaged Chung Lien as advisor and placement agent to raise funds from investors of up to $10,000,000 by June 30, 2007 (the Chung Lien Offering).

Pursuant to the Chung Lien Agency Agreement, the Company (1) agreed to pay Chung
Lien compensation fee in an amount equal to 8% of the aggregate gross proceeds
raised by Chung Lien and received by the Company; (2) issued Chung Lien warrants
exercisable for a term of five years to purchase up to 1,500,000 shares of
common stock of the Company at $0.45 per share, subject to terms and
conditions of the warrant certificate; (3) agreed to reimburse expenses incurred
by Chung Lien in connection with the Offering up to $30,000; (4) agreed to
deposit $250,000 in a segregated account at a financing institution designated
by Chung Lien for the sole purpose of funding any losses due to currency
fluctuations resulting from funds in Chinese currency held by Chung Lien on
behalf of other investors from the date of receipt of such funds and the closing
date of the Offering; and (5) agreed to file a registration statement for common
shares issuable upon exercise of the Warrants within 90 days after the signing
of the Chung Lien Agency Agreement. In addition, the Company agreed not to offer
its common stock in any financing transaction at a price lower than $0.75 per
share before June 30, 2007.

On April 19, 2007, the Company entered into a subscription  agreement with Chung
Lien,  under which the Company  issued a five-year  convertible  debenture  (the
Chung  Lien  Convertible  Debenture)  in  the  principal  amount  of
$1,000,000 in consideration of $1,000,000.  The Chung Lien Convertible Debenture
bears  interest at an annual rate of 11% and  principal  and  interest  payments
payable in monthly  installments  beginning  on April 19,  2007.  The Chung Lien
Convertible  Debenture is convertible into shares of common stock of the Company
at the greater of (a) $0.75 per share or (b) 70% of the five-day  average market
trading price of the common stock of the Company immediately  preceding the date
of conversion. The Company also agreed to file a registration statement with the
SEC to  register  the  resale  of the  common  stock  issuable  upon  conversion



11



---





of the debenture no later than  September 30, 2007.  The Company may prepay,  in
cash or common stock, all or portion of the Chung Lien Convertible  Debenture at
any time prior to the maturity date without penalty. Tom Liu (the Companys
Chief  Executive  Officer)  and David Liu,  two  principal  shareholders  of the
Company,  each  pledged  600,000  shares of common  stock,  a total of 1,200,000
shares of common stock,  to secure the repayment of the debenture.  After paying
Chung  Lien a  compensation  fee of 8%  ($80,000)  and other  bank  charges  and
transactional  expenses,  the Company  received net proceeds from the placement of
the  convertible  debenture of  $919,150.  The Company is obligated to reimburse
Chung Lien for legal and other fees in the amount of up to $30,000.  The Company
also issued Chung Lien warrants exercisable for a term of five years to purchase
up to  1,500,000  shares of common stock of the Company at $0.45 per share under
the terms of the Chung Lien Agency Agreement.

|10. | Going Concern
|--- | -------------

The  Company's  financial  statements  are  prepared  using  generally  accepted
accounting  principles  applicable  to a going  concern  that  contemplates  the
realization  of assets and  liquidation  of  liabilities in the normal course of
business. The Company has limited financial resources and, before completing the
renovation  project of the  Miramar  Hotel &  Casino or securing  sufficient
funding to expand the slot machine leasing activities, relies solely on the cash
flows generated from the hotel lodging and leasing revenue.  The completion
of the renovation  project of Miramar Hotel & Casino would be delayed if the
Company fails to raise sufficient capital. Although the Company has entered into
specific  financing  activities to raise funds (see Note 9 above for transactions
with Chung Lien and the issuance of the $1,000,000 convertible  debenture),  the
outcome of its fund raising  efforts is uncertain  at this time.  These  factors
raise substantial doubt about its ability to continue as a going  concern. 
If the Company is  unsuccessful  in their fund raising efforts and cannot attain
sufficient  profitable  operations or if it cannot obtain additional  sources of
funding or investment,  it may  substantially  curtail its operations or abandon
some of its business  plans.  For the same reason,  the Company may be unable to
continue as a going concern.



12



---



|Item 2. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------

All statements other than statements of historical or current facts included in this report on Form 10-QSB or incorporated by reference herein, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as may, will, expect, intend, estimate, anticipate, believe or continue or the negative thereof or variations thereon or similar terminology. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from any future results or
performance expressed or implied by these forward-looking statements. These factors include, those discussed under the caption Risk Factors in the Companys most recent annual reports filed with the SEC on Form 10-KSB on April 2, 2007, and incorporated herein by reference, as well as the following:



| |  |  | the impact of general economic conditions in the Peru and other countries in which we conduct business;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | industry conditions, including competition;
| | - |  | -------------------------------------------



| |  |  | business strategies and intended results;
| | - |  | -----------------------------------------



| |  |  | our ability to integrate acquisitions into our operations and management;
| | - |  | -------------------------------------------------------------------------



| |  |  | our ability to market, sell, lease or profit-share slot machines under our licensing agreement;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | risks associated with the hotel industry and real estate markets and manufacture of slot machines in general;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | the impact of terrorist activity or war, threats of terrorist activity or war and responses to terrorist activity on the economy in general and the travel and hotel industries in particular;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | travelers' fears of exposure to contagious diseases;
| | - |  | ----------------------------------------------------



| |  |  | legislative or regulatory requirements;
| | - |  | ---------------------------------------



| |  |  | access to capital markets; and
| | - |  | ------------------------------



| |  |  | other factors beyond our control.
| | - |  | ---------------------------------

Although we believe that these statements are based upon reasonable assumptions, we can give no assurance that our goals will be achieved. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this report. We assume no obligation to update or revise them or provide reasons why actual results may differ.

We, us, our, the Company and the Registrant in this report refers to Chilco River Holdings Inc. and its subsidiaries, as the context requires.



13



---



Overview

We, Chilco River Holdings, Inc., through our wholly-owned subsidiaries, (i) own all of the assets of and operate the Miramar Hotel and Casino (formerly known as Bruce Hotel and Casino); (ii) hold an exclusive license to manufacture and market low-cost proprietary slot machines and (iii) are developing internet gaming software and systems.

Miramar Hotel and Casino

The Miramar Hotel and Casino is located Jiron Francisco Bolognesi # 171-191 in the Miraflores District, Province and Department of Lima, Peru, approximately 30 minutes from Jorge Charvez International Airport in the heart of Miraflores. The Miramar Hotel and Casino is a destination hotel and casino location for visitors traveling to the Republic of Peru, and we cater to local and foreign visitors, including visitors from the Peoples Republic of China. The Miramar Hotel and Casino business consists of a hotel, restaurants, a gaming casino and real property. We acquired the Miramar Hotel and Casino in connection with a Share Exchange transaction with the shareholders of Kubuk International, Inc., which we refer to in this report as Kubuk, on July 15, 2005. The Miramar Hotel and Casino is a full-service hospitality facility with standard and premium lodging
accommodations (rooms and suites). In addition, the hotel encompasses several dining facilities and a full-featured Gambling Casino with traditional gaming tables and slot machines.

Prior to signing the Kubuk Share Exchange Agreement with Kubuk International, we developed a plan to expand, renovate and modernize the current facilities of the Miramar Hotel and Casino and temporarily suspended the operation of the gaming room in February 2005 and operation of the restaurant and slot room in November 2005. Since that time, we have intended to raise capital to fund the expansion, renovation and modernization of the Miramar Hotel and Casino.

Kubuk Slot Machines

In July 2006, we acquired the exclusive  world-wide  license to manufacture slot
machines based on technology developed by KC. We are in the process of marketing
these slot machines to operators of casinos in South America. We intend to raise
capital to manufacture,  sell, lease or profit-share  machines  beginning in the
fourth quarter of 2006 or early 2007. As of March 31, 2007, we have entered into
slot  machine  profit-sharing  contracts  with a number of Peruvian  slot parlor
operators  for the lease of approximately 300 new slot  machines.  These  contracts
allow us to



14



---





charge a fixed per-machine,  per-day rent or to share
the net  earnings of the slot  machines  that we lease out in 50%-50% or 60%-40%
ratio.  Because of lack of funding to mass  produce the  machines,  we have only
delivered 22 units of new slot machines to these  leasing  customers as of March
31, 2007. We cannot assure you that we will raise sufficient capital to fund the
manufacturing  of slot machines to deliver under the  profit-sharing  contracts.

Internet Software Development

In April 2006, we established a software development office in Shenzhen, China to develop an internet-based computer application for potential future licensing to third parties, who can legally operate licensed internet gaming websites. Internet gaming is illegal in the United States, and we intend to license our software, if developed, only to licensed internet gaming companies which have established controls to operate legally. Internet gaming is subject to substantial regulation and we cannot assure you that we will be able to develop or license our software.

In light of the passage of the Unlawful  Internet  Gambling  Enforcement  Act of
2006,  which is signed by  President  Bush on October 13,  2006,  we anticipate we will have to
license  our  developed  software  to  companies  that  are not  subject  to the
jurisdiction of the United States and operate in foreign markets including,  but
not limited to, South America.  This is expected to limit the potential users of
our software, if we are successful in our development efforts.

Financing Arrangements



On April 19, 2007, we entered into a placement agency agreement (the Chung
Lien Agency  Agreement)  with Chung Lien Investment  Management Limited, a
Hong Kong corporation (Chung  Lien),  by which we engaged Chung Lien
as  advisor  and  placement  agent  to  raise  funds  from  investors  of  up to
$10,000,000 by June 30, 2007 (the Offering).

Pursuant to the Chung Lien Agency Agreement, we (1) agreed to pay Chung
Lien compensation fee in an amount equal to 8% of the aggregate gross proceeds
raised by Chung Lien and received by the Company; (2) issued Chung Lien warrants
exercisable for a term of five years to purchase up to 1,500,000 shares of one
common stock at $0.45 per share, subject to terms and
conditions of the warrant certificate; (3) agreed to reimburse expenses incurred
by Chung Lien in connection with the Offering up to $30,000; (4) agreed to
deposit $250,000 in a segregated account at HSBC designated
by Chung Lien for the sole purpose of funding any losses due to currency
fluctuations resulting from funds in Chinese currency held by Chung Lien on
behalf of other investors from the date of receipt of such funds and the closing
date of the Offering; and (5) agreed to file a registration statement for common
shares issuable upon exercise of the Warrants within 90 days after the signing
of the Chung Lien Agency Agreement. In addition, we agreed not to offer
our common stock in any financing transaction at a price lower than $0.75 per
share before June 30, 2007.

On April 19, 2007,  we entered into a  subscription  agreement  with Chung Lien,
under which we issued a five-year  convertible debenture in the principal amount
of  $1,000,000  in  consideration  of  $1,000,000.  The Chung  Lien  convertible
debenture  bears  interest at an annual rate of 11% and  principal  and interest
payments  payable in  monthly  installments  beginning  on April 19,  2007.  The
convertible  note is  convertible  into shares of our common stock at
the  greater of (a) $0.75 per share or (b) 70% of the  five-day  average  market
trading price of our common stock immediately  preceding the date
of conversion. We also agreed to file a registration statement with the
SEC to register the resale of the common stock  issuable upon  conversion of the
debenture no later than September 30, 2007.  We may prepay,  in cash or
common stock, all or portion of the convertible debenture at any time
prior to the maturity date without penalty. Tom Liu, our Chief Executive Officer, and
David Liu,  two  of our principal  shareholders,  each pledged  600,000
shares of common stock, a total of 1,200,000  shares of common stock,  to secure
the repayment of the debenture. After paying Chung Lien a compensation fee of 8%
($80,000)  and  other bank charges and transactional expenses,
we received  net  proceeds  from  the  placement  of  the
convertible  debenture  of  $919,150. We also issued Chung Lien
warrants exercisable for a term of five years



15



---





to purchase up to 1,500,000 shares of our common stock at $0.45
per share under the terms of the Chung Lien Agency Agreement.

We cannot assure you that we will raise any additional funds under the Chung Lien Agency Agreement.  If we are unable to raise sufficient funds through Chung Lien or with any other potential investors or mortgage lender in debt or equity transactions to complete the renovations, we intend to fund completion of the renovations through cash flow from operations and reopen the casino in stages.  We currently have no firm commitments with respect to additional financing.  Without additional funding, there is substantial doubt that we will be able to continue as a going concern.

Address and Phone Number

We maintain our registered agents office at 6100 Neil Road, Suite 500, Reno, Nevada 89511, and an office at the Miramar Hotel and Casino at Jiron Francisco Bolognesi # 171-191 in the Miraflores District, Province and Department of Lima. Our executive offices are located at 355 Lemon Ave., Suite C, Walnut, CA 91789, and our phone number is (909) 869-7933.

History

We were incorporated on May 8, 2003 under the laws of the State of Nevada.

Our Abandoned Mineral Exploration Business

We were previously engaged in the business of acquiring mineral exploration properties. We purchased all right, title and interest in one unpatented claim in the New Westminster Mining Division of the Province of British Columbia, known as the PEG Claim under an agreement dated November 3, 2003. We were unable to secure funding to conduct additional exploration work on the PEG Claim and we suspended work on the PEG Claim. Our management began exploring other business opportunities at the beginning of 2005. After we acquired our interest in the Miramar Hotel and Casino, we abandoned the PEG Claim by giving notice to the property owner to terminate the agreement in August 2005. We are no longer engaged in the mineral exploration business. We no longer own any mineral exploration properties.

Explanatory Note on Financial Statements

The condensed consolidated financial statements included in this quarterly report on Form 10-QSB have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. In the opinion of management, the accompanying interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, 2007, and our results of operations and cash flows for the quarter ended March 31, 2007. The results of operations for the quarter ended March 31, 2007 are not necessarily indicative of the results for a full-year period. It is suggested that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in our Annual Audit for the year ended December 31, 2006.

Following the Share Exchange,  Kubuk  International,  Inc. became a wholly-owned
subsidiary of Chilco.  Prior to the Share  Exchange,  Chilco had no  substantial
assets and only nominal operations. Accordingly, the transaction is treated as a
reverse  acquisition of Chilco and has been accounted for as a  recapitalization
rather than a business combination. The historical financial statements of Kubuk
International,  Inc. and its predecessor Bruce Grupo Diversion S.A.C. are deemed
to be the historical statements of the Chilco River Holdings, Inc.

Due  to  the  Kubuk  Share  Exchange  Agreement  and  the  significance  of  the
Companys operations, the development stage status of Chilco is
no longer in effect.  The development  stage  disclosures are no longer required



16



---





in  the  Companys  current  status.  Historical  results  of
operations for Chilco River  Holdings,  Inc. may differ  materially  from future
results.



Plan of Operation



We intend to continue the operations of the Miramar Hotel over the next twelve months and reopen the Miramar Casino in the last half of 2007. The Miramar Hotel and Casino is located at Jirón Francisco Bolognesi # 171-191 in the Miraflores District, Province and Department of Lima, approximately 30 minutes from Jorge Charvez International Airport in the heart of Miraflores. The Miramar Hotel and Casino is expected to be a destination hotel and casino location for visitors traveling to the Republic of Peru and caters to visitors from the Peoples Republic of China.

Miramar Hotel and Casino Business

The Miramar Hotel and Casino is located at Jirón Francisco Bolognesi # 171-191 in the Miraflores District, Province and Department of Lima, approximately 30 minutes from Jorge Charvez International Airport in the heart of Miraflores. The Miramar Hotel and Casino is expected to be a destination hotel and casino location for visitors traveling to the Republic of Peru and caters to visitors from the Peoples Republic of China.  The casino and slot room were, prior to closing, popular with the local residents in Peru.

Assuming we are able to complete renovations, the Miramar Hotel and Casino is expected to be a full-service hospitality facility with standard and premium lodging accommodations (rooms and suites). In addition, the hotel is expected to encompass several dining facilities and a full-featured Gambling Casino with traditional gaming tables and slot machines.  Miramar is currently undergoing a major renovations, and when and if reopened, is expected to offer 300-350 slot machines, a poker room and 22 table games. Chilco plans to reopen Miramar in the second half of 2007, provided that sufficient capital is raised prior to June 30, 2007 to complete the renovations in progress.

Hotel: The Miramar Hotel and Casino is expected to be a 60-room full-service hospitality facility with standard and premium lodging accommodations (rooms and suites) and dining facilities. The amenities are planned to include guest suites and rooms with air conditioning, mini-bars, telephone, hair dryer, wake-up service/alarm-clock, radio, satellite TV and safe deposit boxes. The hotel can accommodate 200 guests.  In addition, the hotel once reopened is expected to offer a gaming room, meeting/banquet facilities, a barber/beauty shop and sauna.  The room rates ranges from $70 for a standard room to $95 for an executive suite.

The Miraflores District is one of the most important financial and commercial centers of Lima and approximately 20 minutes from the historical center of Lima. The Miramar Hotel and Casino is supported by urban infrastructure, such as asphalt roads, concrete sidewalks, city water and sewage, public electricity and garbage collection and phone lines. The Miramar Hotel and Casino is located on commercial property and is located on a major thoroughfare.  Our casino and restaurants are expected to attract local residents in Lima, Peru, and we believe a significant amount of our historical gaming revenue was derived from local residents. We have a historic occupancy rate of our hotel averaging approximately 70% during 2004 through 2006. Our occupancy rate is not generally subject to seasonal fluctuation. The following table sets forth the occupancy rate for our hotel during 2006 and the
first three months of 2007:



|Hotel Average Occupancy Rate
|----------------------------
|Month                       
|                            
|January                     
|February                    
|March                       
|April                       





17



---









|May       |  | 71.51% |  |  | 
|--------- |  | ------ |  |  | 
|June      |  | 68.85% |  |  | 
|July      |  | 74.26% |  |  | 
|August    |  | 69.21% |  |  | 
|September |  | 65.33% |  |  | 
|October   |  | 68.54% |  |  | 
|November  |  | 72.44% |  |  | 
|December  |  | 67.44% |  |  | 



Restaurants:  Prior to closing for renovations, the Miramar Hotel & Casino featured two full service restaurants serving Chinese and international cuisine. The restaurants each seated 200 guests. The Miramar Hotel & Casino holds a retail liquor license. The restaurants were closed to the public for renovations in November 2005, but continue to serve meals to hotel guests.

Gaming Casino:  Before closing for renovations, the gaming casino was a full featured casino with 20 traditional gaming tables (blackjack, roulette, craps and poker) and approximately 220 slot machines. The casino was located on the second floor of the Hotel and was approximately 622 square meters.  Once the renovations are completed, the casino is expected to feature two full bars, a VIP area and will be able to accommodate 300 guests.

We hold two gaming licenses for the operation of our casino and slot room, which were granted in 2005. These gaming licenses are valid for five years.

The gaming casino operates under a gaming license issued to Kubuk Gaming SAC by the Republic of Peru. The gaming casino is currently closed for remodeling and is scheduled to reopen to the public in the second half of 2007, assuming adequate financing is available by June 2007.  We are in the process of raising additional capital, but have no current commitment for such financing.  Any delay in raising additional financing will delay our scheduled opening date.

Slot Room:  The slot room is planned to be located on the first floor of the Hotel next to the lobby. Before closing for renovations, the slot room featured 220 slot machines and could accommodate approximately 300 guests. The slot room was closed for renovations in November 2005. As of March 31, 2007, we leased out over 130 slot machines that are retired from the slot room to other local slot parlor operators under various lease terms and profit-sharing agreements. These operating leases vary in terms and average $10 per machine per day in net rental income. We believe the slot machine rental income should continue at least through the end of year 2007.

Under our current renovation plan, the new gaming casino will have a slightly larger space and will feature more than 300 new slot machines, some of which are manufactured by us under the Kubuk brand name.

Real Property: We own all of the real property and assets used in the operation of the Miramar Hotel and Casino. The property consists of one seven-story building and one fourteen-story building that are physically connected and have been configured for use as a hotel, casino and office space. Kubuk uses the office space in connection with its business and does not rent office space to third parties. The property also includes a parking garage. Kubuk owns all of the fixtures, improvements, systems, furniture, gaming machines and gaming tables and the other contents currently used in the business of the Miramar Hotel and Casino.

The renovation of our casino, slot room and restaurants are expected to be completed in second half of 2007, assuming financing is available by June 30, 2007. We expect to raise approximately $4.2 million to complete the renovations, but have no firm commitments for such financing.  Any delay in raising additional financing will delay our scheduled opening date.

Historically, our operating revenue was derived from the following aspects of our business, expressed as percentages relative to total revenue:



18



---







|                | Quarter endedMarch 31 ,2007 | Year 2006 | Year 2005
|--------------- | --------------------------- | --------- | ---------
|Casino-Leasing  | 37%                         |           | 25%      
|Rooms           | 58%                         |           | 69%      
|Food & Beverage | 5%                          |           | 6%       
|Other           | 0%                          |           | 0%       
|Total           | 100%                        |           | 100%     
|                |                             |           |          



Satisfaction of cash obligations for the next twelve months

We believe that the cash flow from our hotel and the rental of old slot machines
will not be sufficient to meet our minimum operating cash requirements to permit
us to continue as a going  concern for the next twelve  months.  We will require
additional  financing.  We intend to use a  combination  of  available  cash and
additional financing to meet obligations over the next twelve months,  including
the cost of  renovation of the casino and  restaurant at an estimated  amount of
$4,200,000.   We  intend  to  secure  additional  financing  in  the  amount  of
approximately $7,387,000 in one or more transactions as soon as practicable.
As of April 14, 2007, we had approximately $860,000 in quick assets and
various financial obligations in the amount of $8,247,000 within the next 12 months.
These financial obligations included:   (1)  casino and hotel renovation in total
budgeted amount of $2,700,000; (2)  voluntary and statutory cash reserves for the
casino in the  amount  of  $1,500,000,  (3)  two  $500,000  installment  payments
payable to KC by June 30,  2007 and  January  31,  2008,  respectively;  (4) 
$2,200,000  for the  production of  approximately  400 new Kubuk Slot  Machines;
(5)  related party loans and accrued interest in the amount of $687,000; (6) accrued
interest payable to Chung Lien (see below) for $110,000; and (7) $50,000 project net
cash outflow in operations.

In December 2006, we borrowed (1) $250,000 from IFG Investments Services Inc., a
Nevis  corporation  located in Nevis  Federation  of St. Kitts &  Nevis West
Indies and controlled by an existing minority  shareholder and (2) $300,000 from
Lee Kuen  Cheung,  one of our 5%  shareholders,  to fund the second  installment
payment  to KC which we made in  January  2007.  The IFG  loan  bears an  annual
interest  of 8% and is due on June 11,  2007.  The loan from Lee Kuen  Cheung is
interest  free and is due on June 27, 2007.  Both loans are evidenced by written
promissory notes.

On January 18, 2007, our board of directors resolved to amend the purchase warrant certificate for each Class A Warrant to purchase shares of common stock in until 5:00 p.m. (California time) on January 20, 2007 to lower the exercise price per share to $0.40 and to extend the exercise period to 5:00 p.m. (California time) on February 20, 2007.  Before the amendment, the exercise price of the Warrants was $1.00 (split-adjusted) per share.  We received $199,040 from the exercise of 497,600 Class A Warrants during the extended re-priced period.  The balance of the Class A Warrants expired unexercised.

On April 19, 2007, we entered into the  Subscription  Agreement  with Chung Lien
and  received  $1,000,000  by issuing a five-year  convertible  debenture in the
principal  amount  of  $1,000,000  bearing  an 11%  annual  interest  rate,  and
convertible  into  shares of our  common  stock at the  greater of (a) $0.75 per
share or (b) 70% of the  five-day  average  market  trading  price of our common
stock immediately preceding the date of conversion. The principal
and interest payments are due on a monthly basis beginning on April 19, 2007. We
may prepay, in cash or common stock, all or portion of the debenture at any time
prior  to the  maturity  date  without  penalty.  Tom Liu (our  Chief  Executive
Officer) and David Liu (Tom Lius  father),  two principal  shareholders of
Chilco, each pledged 600,000 shares of common stock, a total of 1,200,000 shares
of common stock,  to secure the repayment of the  debenture.  After paying Chung
Lien a compensation fee of 8% ($80,000) and other bank charges and transactional
expenses,  we  received  net  proceeds  from the  placement  of the  convertible
debenture of  approximately  $919,150.  We incurred  legal and other expenses of
approximately $35,000 in connection with the placement. We also issued Chung Lien warrants exercisable for
a term of five years to purchase up to 1,500,000 shares of our common stock at $0.45 per share under the
terms of the Chung Lien Agency Agreement.



19



---





We believe that we would have the necessary funding for the completion of the casino/hotel renovation if we are able to raise the remaining $9 million under the Chung Lien Agency Agreement.  If the full amount is raised, we believe that the financing will also allow us to pursue development of our slot machine leasing business and our gaming software development projects.  However, there is no firm commitment under the Chung Lien Agency Agreement and there can be no assurance that Chung Lien will successfully assist us in raising any additional funds.  If we are unable to raise sufficient funds through Chung Lien or with any other potential investors or mortgage lender in debt or equity transactions to complete the renovations, we plan to fund completion of the renovations through cash flow from operations and reopen the casino in stages.  However, we currently have no firm commitments
with respect to additional financing and we may not have sufficient cash flow from operations to satisfy all of our capital requirements.  Consequently, we may be unable to continue as a going concern.

Since the inception of our software development center in Shenzhen, China, most of the operating expenses in China have been advanced by Wai Yung Lau, one of our directors.  These advances are payable by demand and do not bear stated interest.  The unpaid balance of such advancements was $127,717 as of March 31, 2007.

Summary of any product research and development that we will perform for the term of the plan

In April 2006 we started a software development project in Shenzhen, China by contracting with several programmers to develop an internet based computer gaming application for potential future licensing to third parties. We anticipate that we will spend approximately $150,000 on software development during the next 12 months, assuming adequate financing is available.  Since the inception of our software development center in Shenzhen, China, most of our operating expenses in China have been advanced by Wai Yung Lau, one of our directors.  The success of this software development project depends heavily on our ability to raise sufficient capital or borrowing from debt to fund the project through its feasibility test stage. If, for any reason, we have difficulties raising financial resources to complete the casino and hotel renovation, we will have to delay or suspend the software development project.

| | Expected purchase or sale of plant and significant equipment
| | ------------------------------------------------------------

Prior to the completion of renovations  and the reopening of the gaming room, we
will have to acquire additional gaming equipment and hotel furniture.  Estimated
costs  of the  acquisition  of  equipment,  furniture  and  improvements  are as
follows:



|                                    | 
|----------------------------------- | 
|Slot Machines                       | 
|Other casino equipment              | 
|Building improvements and furniture | 
|Restaurant and lounge               | 
|Voluntary & statutory cash reserve  | 
|Total                               | 



The total slot machine estimated cost includes the purchase of 210 Kubuk machines and 31 used machines. The cost for 100 units of other brands of machines was not factored in because all units are expected to be financed without upfront costs.

We acquired exclusive rights to manufacture and sell cost-competitive slot machines. We intend to manufacture and distribute the slot machines in central and South American markets, assuming adequate capital is available. We do not plan to establish our own manufacturing facility to produce Kubuk gaming machines. Instead, we plan to contract our manufacturing with a third-party manufacturer.
We anticipate we will require at least $2.2 million additional financing for our slot machines business in the next 12 months.  Due to lack of funding for the production



20



---





cost,  we were only able to produce and lease 22 new slot  machines  during year
2006 with the  acquired  license  rights.  We  acquired  our  rights to the slot
machines  under a  Licensing  Agreement  dated July 7, 2006 with KC. We acquired
from KC a worldwide exclusive and perpetual license to use KCs  technology
to manufacture, market and distribute KC designed slot machines and other gaming
products,  including an electronic data transfer device  trademarked  Smartbook.
The technology includes all technology,  tools,  design,  components,  hardware,
software,  and specification  necessary for the design and manufacturing of slot
machines and Smartbook and all associated patents, trademarks, copyrights, trade
secrets,  know-how.  We agreed to pay KC a cash  license fee of  $2,500,000,  of
which,  $500,000  was paid in July 2006,  and the  balance  will be paid in four
equal   installments   of  $500,000  each  at  the  end  of  January  and  June,
respectively,  during  the next two  years.  We made the  $500,000  license  fee
payment  in January  2007 by  borrowing  funds  from a  director  and one of our
shareholders.  We also  agreed  to pay KC a  licensee  fee in  common  stock  of
6,000,000  shares  of  restricted  common  stock,  par  value  $0.001,  of which
3,000,000  share were issued in July 2006,  1,500,000  to be issued on the first
anniversary of the date of the effective date, and 1,500,000 to be issued on the
second anniversary of the effective date. We granted KC registration  rights and
undertook  to  use  commercially  reasonable  efforts  to  file  a  registration
statement  with the SEC within 90 days of the  effective  date of the agreement to  register  for
resale the first 3,000,000 shares common stock issued to KC under the KC License
Agreement.  We intend  to file the  registration  statement  during  the  second
quarter  of 2007.  The cash  payments  and the fair  market  value of the shares
issued under the  Licensing  Agreement are  capitalized  on our balance sheet as
intangible  assets and are  determined  to have  infinite  useful  lives.  These
capitalized  intangible  licensing  rights are not  amortized  and are tested at
least annually to determine whether  impairment of value has occurred by the end
of each  fiscal  year.  If it is  determined  that the  carrying  value of these
intangibles  has been  impaired,  a loss will be recognized to the extent of the
excess of such  carrying  value  over the fair  value of these  intangibles.  No
impairment   loss   is   recorded   as   of   March   31,   2007.



Significant changes in number of employees

We  currently have 38  employees. We intend to maintain these employees, assuming
adequate financing is available prior to June 30, 2007.

Results of Operations for the Three Months Ended March 31, 2007 and 2006.



We had revenues of $381,457 during the three months ended March 31, 2007, compared to revenues of $351,959 during the same period in 2006.  Overall revenues were up 8% for the three-month comparative period.  Revenue from leasing of the slot machines increased $83,711, or 152% in the first quarter of 2007 versus 2006.  We did not lease out all of the retired slot until the second quarter of 2006, which caused the leasing revenue for the first quarter of 2006 to appear significantly lower than the first quarter of 2007.

Operating  expenses  during the three months ended March 31, 2007 were $716,187,
compared to $693,189  for the same period in 2006.  In addition to  depreciation
expense in the amount of $168,194,  which does not require  payment of cash,  we
have the  following  non-cash  expenses  during  the  quarter  ended  March  31,
2007:

| | (i) | Amortization of prepaid stock compensation for consulting services provided by Clear Channel Inc. totaling $115,000 for the quarter
| | --- | -----------------------------------------------------------------------------------------------------------------------------------

| | (ii) | Amortization of maintenance service contract under the KC Licensing Agreement totaling $112,118.
| | ---- | ------------------------------------------------------------------------------------------------

Consequently,  loss from  operation for the  three-month  period ended March 31,
2007 was $(334,730), compared to loss from operation in the amount of $(341,230)
for the same period in 2006.  Income  (loss) from  operation as a percentage  of
revenue for the three-month periods ended March 31, 2007 and 2006 was (88) % and
(97) %, respectively. The losses from operation during the first quarter of 2007
and 2006 were a direct  result of the closure of our casino  floor and slot room
in 2005  for  renovation  and the  increased  public  company  compliance  costs
following the reverse merger transaction in July 2005.



21



---





Net loss,  after other income and expenses and provision  for income taxes,  was
$(485,037)(a net loss of $0.01
per share) for the three-month period ended March 31, 2007, compared to net loss
of $(348,034) ($0.01 per share) for the three-month period ended March 31, 2006.
The increase in other  income and  expenses in the first  quarter of 2007 versus
2006 was largely  attributable to the imputed  interest expense in the amount of
$142,792 on our  obligations  to pay cash and issue shares to KC Technology  for
the acquisition of its licensing rights. We incurred Peruvian income taxes of $9,617
and  $12,662  for the  three-month  periods  ended  March  31,  2007  and  2006,
respectively.  We had an  unrealized  loss on foreign  currency  translation  of
$(632,939) during the three-month  period ended March 31, 2007,  compared to a $
(7,219) loss during the same period in 2006.

Our  revenues  during  the  periods  after  the  closure  of our  slot  room and
restaurant  in November  2005 were  principally  derived from hotel  revenue and
revenue from rental of old slot  machines.  We do not  anticipate  that revenues
will return to historical  levels until the  renovations of its casino floor are
completed. We have several fixed costs related to its operations, which resulted
in higher  operating  expenses and lower  operating  revenue as a percentage  of
sales.  We anticipate  that our expenses as a percentage of sales will remain at
approximately  the same  level  until our  casino is fully  operational.  We are
currently seeking to raise at least $7.4 million,  $4.2 million of which is expected
to allocated to renovate and  modernize  the current  facilities  of the Miramar
Hotel  &  Casino.  We have no firm  commitments  to raise  such  capital  to
complete  such  renovations  and we cannot  assure  you that such  funds will be
available on acceptable  terms,  if at all. Any delay in raising  financing will
delay  our  planned  reopening  of our hotel and  casino in the  second  half of
2007.

In addition, we entered into the KC Licensing Agreement with KC, under which the
registrant  acquired from KC a worldwide  exclusive and perpetual license to use
KCs  technology  to  manufacture,  market and  distribute KC designed slot
machines and other gaming products, including an electronic data transfer device
trademarked   Smartbook.   See,   Summary  of  any  product  research  and
development that we will perform for the term of the plan - Expected purchase or
sale of plant and significant equipment,  above. Under the terms of the KC
Licensing Agreement, we are required to pay KC an installment license payment of
$500,000 on June 30, 2007 and to issue KC  1,500,000  shares of our common stock
on July 7, 2007. If we fail to make such payment and issuance,  KC may terminate
the license and we will lose our investment. In addition, we undertook to file a
registration  statement with the SEC to use commercially  reasonable  efforts to
register the resale of the  6,000,000  shares issued or issuable to KC under the
KC License  Agreement.  We plan to file a  registration  statement  with the SEC
during  the  second  quarter  of 2007 and our  failure  to do so may be deemed a
breach of the  agreement  giving  rise to  KCs  ability to  terminate  the
license. A  termination  of the license will have a
material adverse effect on our business and results of operations.

We  anticipate  that we will need to raise at least $2.2  million in  additional
capital to fund our plan of operation related to our slot machine  business.  We
cannot assure you that we will  successfully  raise such financing on acceptable
terms,  if at all, or that we will be  successful  in marketing  and selling our
slot machines.

Liquidity and Capital Resources

We are in the process of  completing a  comprehensive  renovation of the Miramar
Hotel  &  Casino  and  will  require  additional  capital  to  complete  the
remodeling  of the casino  and resume  operations  of the casino  floor.  We are
currently  seeking  to raise at least $4.2 million  in  capital  to  complete  the
renovation and meet the voluntary and statutory cash reserve requirement for the
casino operation, and anticipate that we will require an additional $2.2 million
for working  capital and to fund our slot  machine  business  during the next 12
months.



We intend to market, sell, lease or profit-share slot machines this year.  Because of lack of funding, we were only able to produce and lease 22 new slot machines in 2006. We made the second $500,000 installment payment to KC on January 31, 2007, and we have commitments to make payments of $500,000 each in June 2007, January 2008 and June 2008 under the terms of the KC License Agreement.  We are also required to issue K. C. 1,500,000 shares of our common stock in each of June 2007 and  June 2008.  If we fail to make such payments  or issue such shares in a timely manner, we will default under the terms of the KC License Agreement and could lose the license. We cannot assure you that we will successfully raise such financing on acceptable terms, if at all, or that we will be successful in marketing and selling our slot machines.  We have no firm commitments for such financing.



22



---







Cash flows from operations during the three months ended March 31, 2007 (a net cash outflow in the amount of $(262,503)) were lower than cash flows from operations during the same period in 2006 (a net cash outflow in the amount of $(162,712)) by $99,791. Among the major changes in operating cash flows in 2007 is a $250,000 currency deposit required under the Chung Lien Agency Agreement.  Net cash outflows from operating activities would become $12,503, if the currency deposit was excluded.



As of March 31, 2007,  we had current  assets of $1,721,094  including  cash and
cash equivalents of $597,223,  and current  liabilities of $3,530,894.  We had a
working capital  deficit of  $(1,809,800).  As of March 31, 2007, we have
commitments and contractual
obligations  during  the next 12 months of  approximately  $1,800,000,  which is
attributable   to   the   KC   License    Agreement and related party loans and
accrued interest.    In April 2007, we borrowed $1,000,000 from Chung Lien with
a 5-year convertible debenture bearing interest at 11% per annum.  Our long-term debt
obligations in the
amount of $2,007,825 is derived from present value of the cash  installment  and
shares  issuance  obligations  with respect to the KC License  Agreement.  As of
March 31, 2007,  out of the total  installment  payable  (current and long-term)
related  to  the  KC  License  Agreement,  $3,356,816  is  attributable  to  our
obligation  to issue shares of common stock to KC in the next 14 months and will
not require any cash outlay  when we satisfy  this  obligation.  As of March 31,
2007, the present value of our future  monetary  obligations for the installment
payments under the KC license right is $1,367,677.



In December 2006, we borrowed (1)  $250,000 from IFG Investments Services Inc., a
Nevis  corporation  located in Nevis  Federation  of St. Kitts &  Nevis West
Indies and  controlled by an existing  minority  shareholder  before we made the
Currency  Deposit  payment  pursuant  to the term sheet of Chung  Lien,  and (2) 
$300,000 from Lee Kuen Cheung,  one of our 5%  shareholders,  to fund the second
installment  payment to KC. The IFG loan bears an annual  interest  of 8% and is
due on June 11, 2007. The loan from Lee Kuen Cheung is interest free and will be
due  on  June  27,  2007.  Both  loans  are  evidenced  by  written   promissory
notes.

Since the inception of our software development center in Shenzhen,  China, most
of the  operating  expenses in China have been  advanced by Wai Yung Lau, one of
our  directors.  These  advances  are  payable by demand and do not bear  stated
interest.  The unpaid balance of such  advancements was $127,717 as of March 31,
2007.



We  anticipate  that it will  require  at  least  $4.2  million  to  complete  the
renovation and open our casino.  We do not have sufficient cash flow and working
capital to complete  our  renovations.  We plan to complete  our  renovation  in
stages and will not start  renovating the restaurant and creating the new lounge
area until the renovation of slot room is completed or until sufficient  funding
for     all      renovation      projects     is     secured.



Historically,  in  2004,  casino  and slot  machine  revenue  accounted  for 82%
(approximately  $8.75  million)  of out  total  revenue.  Slot  machine  revenue
accounted for 45% ($3.96 million) of total casino and slot machine  revenue.  We
project that our future annual  revenue will exceed 2004  historical  revenue of
$10.7  million if we are able to  complete  our  renovations.  If we are able to
complete  renovations of our casino floor,  based on historical  operations,  we
estimate that annual  casino  revenues  should  increase to  approximately  $6.4
million.    If we complete
renovations of our slot room, we estimate that annual slot machine revenue could
increase      to       approximately       $6.5      million.       Restaurant   revenue   has
historically,   based  on  2004  revenue,   accounted  for  approximately  4.67%
($500,000) of our total revenue.



We currently  have no alternative  sources of funding,  and we currently rely on
cash flow from our hotel and the rental of old slot machines to meet our working
capital  requirements.  During the quarter ended March 31, 2007, we used cash of $262,503 for operating
activities.  We anticipate we will continue to use cash in operating activities until our
casino is reopened. Our  current  plan is to reopen  our  entire  gaming and
restaurant operations once we have completed all of the renovations. However, if
funds are not  available  to  complete  all of the  renovations,  we may  reopen
portions  of our  gaming  operation  in  stages  as  renovations  are  completed
beginning with our casino floor and then our slot room.



As a result of the December 31, 2006 audit, our auditors have expressed substantial doubt regarding our ability to continue as a going concern.  Our financial statements have been prepared based on the assumption that we will be able to continue as a going concern. If we fail to raise additional capital in the next six months, we may be unable to continue as a going concern.





23



---







Off-Balance Sheet Arrangements



We had no off-balance sheet transactions.

|Item 3. | Controls and Procedures
|------- | -----------------------

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were adequately designed and are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms.

In addition, our Chief Executive Officer and Chief Financial Officer have determined that the disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that are filed under the Exchange Act are accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

During the most recent fiscal quarter ended March 31, 2007, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II  OTHER INFORMATION

|Item 1. | Legal Proceedings.                                           | 
|------- | ------------------------------------------------------------ | 
|        | None.                                                        | 
|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|        |                                                              | 

The  information set forth under Item 1 of Part I of this report is incorporated
by reference in response to this Item 2.

In January 2007, the Company received $199,040 for issuance of 497,600 shares of
common  stock  pursuant  to an  exercise  of Class A  Warrants  to  non-U.S.
persons  in an  offshore  transaction,
pursuant to an exemption from  registration  available under Rule 903 of
Regulation S of the United  States  Securities  Act  of  1933,  as  amended  (the   Securities
Act).    The entire  proceeds  will be used toward the
renovation  of the  Miramar  Hotel and Casino and as  general  working  capital.

The  issuance of common stock to KC and offering of  convertible  debenture  and
issuance of warrants to Chung Lien were  conducted by the Company in an offshore
transaction to a non-U.S. person pursuant to an exemption from registration  available under Rule 903
of  Regulation S of the  Securities  Act. The  securities  are  restricted
securities as defined under rule 144 of the Securities Act.

|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

| | None.
| | -----

24



---







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



|        | None.              | 
|------- | ------------------ | 
|Item 5. | Other Information. | 
|        |                    | 



None.

|Item 6. | Exhibits.
|------- | ---------



| | Exhibits | 
| | -------- | 



| | Number |  | Description
| | ------ |  | -----------



| | 3.1 (1) |  | Articles of Incorporation
| | ------- |  | -------------------------



| | 3.2 (1) |  | Bylaws
| | ------- |  | ------



| | 4.1 (2) |  | Convertible Debenture dated April 19, 2007 issued to Chung Lien Investment Management Limited
| | ------- |  | ---------------------------------------------------------------------------------------------



| | 4.2 (2) |  | Warrants dated April 19,2007 issued to Chung Lien Investment Management Limited
| | ------- |  | -------------------------------------------------------------------------------



| | 10.1 (1) |  | Share Exchange Agreement (previously filed as Exhibit 99.1)
| | -------- |  | -----------------------------------------------------------



| | 10.2 (1) |  | Escrow Agreement dated August 3, 2005 (previously filed as Exhibit 99.1)
| | -------- |  | ------------------------------------------------------------------------



| | 10.3 (1) |  | Contribution Agreement dated July 26, 2005 (previously filed as Exhibit 99.1)
| | -------- |  | -----------------------------------------------------------------------------



| | 10.4 (1) |  | Stock Purchase Agreement dated July 26, 2005 (previously filed as Exhibit 99.1)
| | -------- |  | -------------------------------------------------------------------------------



| | 10.5 (3) |  | Marketing Services Agreement with Parker Communication Corporation
| | -------- |  | ------------------------------------------------------------------



| | 10.6 (4) |  | Consulting Agreement with Clear Channel Inc., as amended
| | -------- |  | --------------------------------------------------------



| | 10.7 (3) |  | Form of Unit Purchase Agreement
| | -------- |  | -------------------------------



| | 10.8 (3) |  | Form of Warrant Certificate
| | -------- |  | ---------------------------



| | 10.9 (4) |  | Loan Agreement dated December 31, 2005 with David Liu
| | -------- |  | -----------------------------------------------------



| | 10.10 (4) |  | Loan Agreement dated December 31, 2005 with Lottery Online U.S.A.
| | --------- |  | -----------------------------------------------------------------



| | 10.11 (5) |  | License Agreement dated July 7, 2006 with K.C. Technology
| | --------- |  | ---------------------------------------------------------



| | 10.12 (6) |  | Promissory Note dated December 14, 2006 issued to IFG Investments Services Inc.
| | --------- |  | -------------------------------------------------------------------------------



| | 10.13 (6) |  | Promissory Note dated December 27, 2006 issued to Lee Kuen Cheung
| | --------- |  | -----------------------------------------------------------------





25



---









| | 10.14 (2) |  | Placement Agent Agreement dated April 19, 2007 with Chung Lien Investment Management Limited
| | --------- |  | --------------------------------------------------------------------------------------------



| | 10.15 (2) |  | Subscription Agreement dated April 19, 2007 by Chung Lien Investment Management Limited
| | --------- |  | ---------------------------------------------------------------------------------------



| | 31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 32.1 |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
| | ---- |  | ------------------------------------------------------------------------------------------



| | 32.2 |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
| | ---- |  | ------------------------------------------------------------------------------------------



| | 99.1 (2) |  | Press Release dated April 20, 2007 with respect to Chung Lien transaction
| | -------- |  | -------------------------------------------------------------------------



| | 99.2 (7) |  | Press Release dated May 3, 2007 with respect to Chung Lien transaction
| | -------- |  | ----------------------------------------------------------------------



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



| | (1) |  | Previously filed on Form SB-2 dated March 8, 2004
| | --- |  | -------------------------------------------------



| | (2) |  | Previously filed on Form 8-K dated April 25, 2007
| | --- |  | -------------------------------------------------



| | (3) |  | Previously filed on Form SB-2 dated February 17, 2006
| | --- |  | -----------------------------------------------------



| | (4) |  | Previously filed on Form 10-KSB dated March 31, 2006
| | --- |  | ----------------------------------------------------



| | (5) |  | Previously filed on Form 8-K dated July 10, 2006
| | --- |  | ------------------------------------------------



| | (6) |  | Previously filed on Form 10-KSB dated April 2, 2007
| | --- |  | ---------------------------------------------------



| | (7) |  | Previously filed on Form 8-K dated May 3, 2007
| | --- |  | ----------------------------------------------





26



---







SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:

Chilco River Holdings Inc.

By:  /s/ Tom Yu Liu

|                     | __________________________________________
|-------------------- | ------------------------------------------
|                     | Tom Yu Liu                                
|                     | Chief Executive Officer                   
|                     | (Principal Executive Officer)             
|Date:   May 15, 2007 |                                           
|                     |                                           



By:  /s/ Winston Yen

|                     | __________________________________________  
|-------------------- | --------------------------------------------
|                     | Winston Yen                                 
|                     | Chief Financial Officer                     
|                     | (Principal Financial and Accounting Officer)
|Date:   May 15, 2007 |                                             
|                     |                                             







27

---