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:   June 30, 2006
| | -----------------------------------------------

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

Commission file number:

CHILCO RIVER HOLDINGS INC.(Exact name of small business issuer as specified in
its charter)

|Nevada
(State or other jurisdiction of 
incorporation or organization) | 98-0419129
(I.R.S. Employer 
Identification No.)
|---------------------------------------------------------------------- | ------------------------------------------------

|355 Lemon Avenue, Suite C 
    Walnut, 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.

Yes         No

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

Yes         No

As of August 15, 2006 there were
47,348,000 shares of common stock outstanding.

Transitional Small
Business Disclosure Format (check one)

Yes         No

---

|                               |  | Page                                                                                                              
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------
|Part I  FINANCIAL INFORMATION |  |                                                                                                                   
|
|Item 1                         |  | Unaudited Condensed Consolidated Financial Statements                                                             
|
|                               |  | Condensed Consolidated Balance Sheet as of June 30, 2006                                                          
|
|                               |  | Condensed Consolidated Statement of Operations for three and six months ended June 30, 2006 and 2005
of Operations
|
|                               |  | Condensed Consolidated Statement of
 Cash Flows for six months ended June 30, 2006 and 2005                       
|
|                               |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                    
|
|Item 2                         |  | Plan of Operation                                                                                                 
|
|Item 3                         |  | Controls and Procedures                                                                                           
|
|Part II  OTHER INFORMATION    |  |                                                                                                                   
|
|Item 1.                        |  | Legal Proceedings                                                                                                 
|
|Item 1A.                       |  | Risk Factors                                                                                                      
|
|Item 2.                        |  | Unregistered Sales of
Equity Securities and Use of Proceeds                                                       
|
|Item 3.                        |  | Defaults Upon
Senior Securities                                                                                   
|
|Item 4.                        |  | Submissions of Matters to a
Vote of Security Holders                                                              
|
|Item 5                         |  | Other Information                                                                                                 
|
|Item 6                         |  | Exhibits                                                                                                          
|
|22                             | 

i

---

Explanatory Note:  On July 5,
2007, Chilco River Holdings Inc. effected a two-for-one split by way of stock dividend.
Each shareholder of record on July 5, 2006 at 5:00 p.m. (Eastern Time) received one
additional share of common stock. On July 5, 2006, there were 21,840,667 shares
of common stock issued and outstanding. After giving effect to the stock dividend, the
Company had 43,681,334 shares. Information contained in this quarterly report gives
retroactive effect to the stock dividend.

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

|                                                            | June 30, 2006
|----------------------------------------------------------- | -------------
|                                                            |              
|ASSETS                                                      |              
|Current Assets                                              |              
|Cash                                                        |              
|Accounts receivable, net of allowance for doubtful accounts |              
|of $ nil as of June 30, 2006                                |              
|Note receivable                                             |              
|Inventory                                                   |              
|Prepaid expense & other current assets                      |              
|VAT tax recoverable                                         |              
|                                                            |              
|Total Current Assets                                        |              
|                                                            |              
|Property, furniture & equipment,                            |              
|net of accumulated depreciation of $6,961584                |              
|as of June 30, 2006                                         |              
|                                                            |              
|Non Current Deferred Tax Asset                              |              
|                                                            |              
|Total Other Assets                                          |              
|                                                            |              
|TOTAL ASSETS                                                |              
|                                                            |              
|LIABILITIES AND STOCKHOLDERS' EQUITY                        |              
|Current Liabilities                                         |              
|Accounts payable                                            |              
|Accrued expenses and other payables                         |              
|                                                            |              
|Total Current Liabilities                                   |              
|                                                            |              
|TOTAL LIABILITIES                                           |              
|                                                            |              
|Shareholders' Equity                                        |              
|Common stock: $.001 par value, 100,000,000 authorized       |              
|shares, 43,681,334 shares issued and outstanding            |              
|Additional Paid-in Capital                                  |              
|Prepaid Stock Compensation                                  |              
|Subscribed Capital                                          |              
|Accumulated deficit                                         |              
|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$)

|                                                | Three Months Ending
June 30, | Six Months Ending
June 30,
|----------------------------------------------- | ---------------------------- | --------------------------
|                                               
|
|                                                |                              |                           
|Revenues                                        |                              |                           
|Casino                                          |                              |                           
|Rooms                                           |                              |                           
|Food and Beverage                               |                              |                           
|Other                                           |                              |                           
|                                                |                              |                           
|                                               
|Less: Promotional Allowances                    |                              |                           
|                                                |                              |                           
|Total Revenues                                  |                              |                           
|                                                |                              |                           
|Operating Expenses                              |                              |                           
|Operating departments                           |                              |                           
|General and administrative                      |                              |                           
|Depreciation                                    |                              |                           
|                                                |                              |                           
|Total Operating Expenses                        |                              |                           
|                                                |                              |                           
|Income from Operations                          |                              |                           
|                                                |                              |                           
|                                               
|Other Income and Expenses                       |                              |                           
|Interest income                                 |                              |                           
|Other income/gains                              |                              |                           
|Other expenses/losses                           |                              |                           
|                                                |                              |                           
|                                                |                              |                           
|                                                |                              |                           
|Income before income tax                        |                              |                           
|Provision for income tax                        |                              |                           
|                                                |                              |                           
|Net Income (Loss)                               |                              |                           
|                                                |                              |                           
|Other Comprehensive Income                      |                              |                           
|Unrealized gain (loss) on                       |                              |                           
|Foreign Currency Translation, net of tax - Note |                              |                           
|                                                |                              |                           
|Total Comprehensive Income                      |                              |                           
|                                                |                              |                           
|                                               
|Basic Earnings Per Share                        |                              |                           
|Diluted Earnings Per Share                      |                              |                           
|Weighted Average Shares Outstanding             |                              |                           
|                                                |                              |                           

(Unaudited  See Accompanying
Notes)

2

---

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

|                                                        | For the Six Months
Ended June 30,
|------------------------------------------------------- | ---------------------------------
|
|                                                        |                                  
|Cash Flows from Operating Activities                    |                                  
|Net Income                                              |                                  
|Adjustments to reconcile net income to cash flows       |                                  
|from operating activities                               |                                  
|Depreciation                                            |                                  
|Prepaid expense via stock issuance                      |                                  
|(Increase)/Decrease in account balances of:             |                                  
|Accounts receivable                                     |                                  
|Other receivable                                        |                                  
|Inventory                                               |                                  
|Prepaid expense & other current assets                  |                                  
|Other assets                                            |                                  
|Increase/(Decrease) in account balances of:             |                                  
|Accounts payable                                        |                                  
|Accrued expenses and other payables                     |                                  
|Foreign Taxes Payable                                   |                                  
|                                                        |                                  
|Cash Flows from Operating Activities                    |                                  
|                                                        |                                  
|Cash Flows Used by Investing Activities                 |                                  
|Purchase of properties and equipment                    |                                  
|Cash paid for construction in progress                  |                                  
|                                                        |                                  
|Cash Used by Investing Activities                       |                                  
|                                                        |                                  
|Cash Flows from Financing Activities                    |                                  
|Cash lent to affiliate company                          |                                  
|Cash repayment for shareholder loans                    |                                  
|Cash paid for dividend                                  |                                  
|Proceeds from issuance of common stock-Kubuk Investment |                                  
|Proceeds from issuance of common stock-Kubuk Gaming     |                                  
|Cash proceeds from subscribed capital                   |                                  
|                                                        |                                  
|Cash Used in Financing Activities                       |                                  
|                                                        |                                  
|Other comprehensive income from current year            |                                  
|                                                        |                                  
|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 
June 30, 2006
Unaudited

Preliminary Note

The accompanying condensed
consolidated financial statements have been prepared without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. 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 and six-month periods ended June 30,
2006, 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, 2005.

|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 has suspended any mineral exploration effort. The Company
holds no mineral property interests at June 30, 2006.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 Bruce
Hotel/Casino). Bruce Hotel/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) 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
(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 Bruce Hotel/Casino. The only
assets that were transferred to KISAC are the assets as listed under Property,
Furniture, and Equipment on the balance sheet. All other assets and liabilities
continue to belong to BGD and will subsequently be distributed to its current shareholder.
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 in FAS
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
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

---

# Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements 
June 30, 2006
Unaudited

| | 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 Bruce Hotel/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 Bruce Hotel/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 December
31, 2005, the Company carried out only the hotel lodging operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 with KII and certain
representatives of its shareholders. Under the terms of the 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 Share Exchange Agreement by issuing 19,250,000 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. Its 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 3,964,000 shares of the CRH common stock to the
Company as an additional capital contribution. The shares were cancelled effective as of
August 3, 2005. See Note 6 for information regarding the related escrow agreements and
share contribution agreement.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5

---

# Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements 
June 30, 2006
Unaudited

| | successful software development and testing, license the online gaming software to third
parties qualified to conduct licensed online gaming activities outside of the United States in
jurisdictions where on-line gaming is legal. The Company
has applied to the local government in China for the foreign business branch office status for its
Chinese software development center.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
July 5, 2007, the Company effected a two-for-one split by way of stock dividend.
Each shareholder of record on July 5, 2006 at 5:00 p.m. (eastern time) received one
additional share of common stock. On July 5, 2006, there were 21,840,667 shares of
common stock issued and outstanding. After giving effect to the stock dividend, the
Company had 43,681,334 shares of common stock outstanding. These financial statements
give retroactive effect to the stock dividend.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

---

# Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements 
June 30, 2006
Unaudited

| | (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 six
months ended June 30, 2006 as all casino and slot machine operations are temporarily
suspended for renovation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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 in Statement of Financial Accounting Standards (SFAS) No. 109, Accounting
for Income Taxes. As changes in tax laws or rate 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 of the 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g) |  | Basic
and Diluted Earnings 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 under SFAS No. 128 Earnings per Share.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

# Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements 
June 30, 2006
Unaudited

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

| | 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 with SFAS 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) |  | 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. As of June 30,
2006, the Company had an exposure in the amount of $445,767 that exceeded the FDIC
insurance coverage. The banks or financial institutions in Peru may not provide sufficient
deposit insurance coverage on the Companys cash positions.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (k) |  | Shares-Based
Compensation
| | --- |  | -------------------------

| | In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R,
Share Based Payment. SFAS 123R is a revision of SFAS No. 123 Accounting
for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting
for Stock Issued to Employees and its related implementation guidance. SFAS 123R
establishes standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

---

# Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements 
June 30, 2006
Unaudited

| | 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 123R focuses primarily on accounting for
transactions                     in which an entity obtains employee services in
share-based payment                     transactions. SFAS 123R does not change the
accounting guidance for share-based                     payment transactions with parties
other than employees provided in SFAS 123 as                     originally issued and
Emerging 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
                    123R does not address the accounting for employee share ownership
plans, which                     are subject to AICPA Statement of Position 93-6, Employers                    Accounting
for Employee Stock Ownership Plans. SFAS 123R requires 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 123R                     requires 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 of SFAS                     123R includes 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 under
SFAS 123R as of March 31, 2006. The adoption of this                     standard is not
expected to have a material effect on the Companys results                     of
operations or financial position.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | In
June 2003, the Securities and Exchange Commission (SEC) adopted final rules
under Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404). Commencing
with the Companys Annual Report for the year ending December 31, 2007, the Company
is required to include a report of management on the Companys internal control over
financial reporting. 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; of the framework used by management to evaluate the effectiveness of the
Companys internal control over financial reporting; and that the Companys
independent accounting firm has issued an attestation report on managements
assessment of the Companys
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

---

# Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements 
June 30, 2006
Unaudited

| | internal
control over financial reporting, which report is also required to be filed as part of the
Annual Report on Form 10-KSB.
| | ---------------------------------------------------------------------------------------------------------------------------------

| | The
FASB issued FASB Statement No. 154 (SFAS 154) which replaces APB Opinion No. 20,
Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim
Financial Statements, and changes the requirements for the accounting for and reporting of
a change in accounting principle. It is not believed that this will have an impact on the
Company in the foreseeable future as no accounting changes are anticipated.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (m) |  | Reclassifications
| | --- |  | -----------------

| | Certain
amounts have been reclassified in the prior years financial statements to conform to
the current years presentation.
| | ------------------------------------------------------------------------------------------------------------------------------

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

| | According
to sales tax laws in Peru, the Peruvian Subsidiaries are 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 Share Exchange Agreement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | The
Company conducts its gaming business at Bruce Casino in 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
3.4066 and 3.2550:1 on June 30, 2006 and 2005, respectively, while the results of
operations are translated into US Dollars equivalents using the weighted average exchange
rates for each six-month period presented.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

# Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements 
June 30, 2006
Unaudited

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

| | As
of June 30, 2006, the Company made a short-term business loan in the amount of $60,000 to
Szchuan Enterprises, Ltd., a Canadian Corporation. The loan is secured by a promissory
note for a term of six-months. The loan bears an interest rate of 4.39% per annum and is
mature on August 9, 2006. Yong Yang is an affiliate of Szchuan Enterprises, Ltd. and a
director of CRH. The Company received the full payment of 61,317 for the
principal balance of the loan and related interest on July 19, 2006.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company incurred over $41,000 of cash expenditures, including amounts capitalized as
computer equipments and office furniture, at its software development center in Shenzhen,
China from April to June 30, 2006. $21,868 of these Shenzhen expenditures have been
advanced by a director of the Company. No interest has been accrued for the amount
advanced. The Company intends to pay back the amount advanced by the director during the
next fiscal quarter.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | On
December 17, 2005, the Board of Directors authorized an initial direct private placement
offering of Units at $1.50 per Unit under the terms of a Unit Purchase Agreement. Each
Unit consists of one share of common stock, and a Class A Warrant exercisable at $2.00 per
share for one year from the date of closing.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
the terms of the Unit Purchase Agreement, the Company is required to use $1,000,000 from
proceeds from the offering to renovate the casino floor of the Bruce Hotel and Casino and
$1,000,000 for marketing and business development. The Company agreed not to offer and
sell shares of common stock or common stock equivalents for a period of 120 days following
the effectiveness of the registration for such Units, except for certain specified
transactions, including an offer and sale of up to 2,000,000 shares of common stock at
$1.50 per share. The private placement was made to non-U.S. persons in off-shore
transactions in reliance upon the exemption from registration available under Rule 903 of
Regulation S of the Securities Act and one accredited investor in the United States
pursuant to an exemption available under Section 4(2) of the Securities Act. The private
placement was closed in January 2006. The Company issued 1,365,667 Units as a result of
the private placement and raised aggregate gross proceeds in the amount of $2,048,500.
1,365,667 shares of common stock were issued on February 14, 2006 by the Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

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# Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements 
June 30, 2006
Unaudited

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

| | During
the third quarter of the year ended December 31, 2005, we issued a notice of default under the terms
of the Escrow Agreement related to an aggregate of 2,000,000 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 a the release of the escrowed
shares. The 2,000,000 shares were tendered to our transfer agent for cancellation and cancelled
during the quarter ended March 31, 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. |  | Subsequent
Events
|-- |  | -----------------

| | On
July 5, 2006 the Companys board of directors has authorized and approved a 2 for 1
forward stock split of its issued and outstanding shares of common stock, par value $0.001
per share, by way of share dividend. Immediately prior to the stock dividend, the Company
had 21,840,667 shares of common stock issued and outstanding. After giving effect to the
stock dividend, the Company has 43,681,334 shares of common stock issued and outstanding.
According to Staff Accounting Bulletin Topic 4c, the stock split has been given
retroactive treatment in the financial statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company intends to raise up to $3,000,000 in additional equity through a private placement
offering started on July 3, 2006. As of July 13, 2006 the Company has completed an offer
and sale of 666,666 units, at a price of $0.75 per unit, each unit consisting of
one share of post-split common stock, par value $0.001, and one non-transferable share
purchase warrant which entitles the purchaser to subscribe for one additional post-split
common share at a price of $0.75 per share by the first anniversary of the date of
issuance.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
July 19, 2006, the Company received the full payment of $61,317 from Szchuan
Enterprises for the principal balance of the loan and associated interest. Penalty charge
for early repayment did not apply as full interest for the entire term was charged.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

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# Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements 
June 30, 2006
Unaudited

| | On
July 7, 2006 (the Effective Date) the Company entered into a License Agreement
(the License Agreement) with K.C. Technology, a Hong Kong corporation
(Licensor), under which the Company acquired from Licensor a worldwide
exclusive and perpetual license to use Licensors technology to manufacture, market
and distribute Licensor 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 Licensor 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 of 2007 and 2008, respectively, during the next two years. The Company
also agreed to pay Licensor 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 Company granted Licensor 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 Licensor under the License
Agreement.  The Company will also pay a royalty of $20 for each Smartbook
sold by the Company under the License Agreement.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company anticipates that it will need to raise at least $1.2 million in additional
capital to fund the plan of operation related to the slot machine business. Further, if
the Company fails to make such payments as described above, the Company will default
under the terms of the License Agreement and could lose the license. The Company cannot
assure that it will successfully raise such financing on acceptable terms, if at all, or
that it will be successful in marketing and selling the slot machines. The Company has no
firm commitments for such financing.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

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# Item 2.    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 attached as
Exhibit 99.1 to the Companys SB-2/A Registration Statement, filed with the
Securities and Exchange commission on May 19, 2006, and incorporated herein by reference,
as well as the following:

| |  |  | the
impact of general economic conditions in the Peru;
| | - |  | ------------------------------------------------------

| |  |  | 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 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.

# Overview

We,
Chilco River Holdings, Inc., through our wholly-owned subsidiaries, own all of the assets
of and operate the Bruce Hotel and Casino. The Bruce 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 Bruce 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 Bruce Hotel and
Casino business consists of a hotel, restaurants, a gaming casino and real property. We
acquired the Bruce 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 Bruce 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.

14

---

Prior
to signing the Share Exchange Agreement with Kubuk International, we developed a plan to
expand, renovate and modernize the current facilities of the Bruce 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. We intend to raise capital to fund the
expansion, renovation and modernization of the Bruce Hotel and Casino.

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
July 2006, we acquired the exclusive world-wide license to manufacture slot machines
based on technology developed by K.C. Technology.  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.

We
maintain our registered agents office at 6100 Neil Road, Suite 500, Reno, Nevada
89511, and an office at the Bruce 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 Bruce Hotel and Casino in April 2006, we abandoned the PEG Claim by giving notice to
the property owner to terminate the agreement. 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
Securities and Exchange Commission. 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 June 30,
2006, and our results of operations and cash flows for the quarter ended
June 30, 2006. The results of operations for the three- and six-month periods ended June 30, 2006 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 Audit for the year ended December
31, 2005.

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

# Plan of Operation

# Hospitality
Business

We
intend to continue the operations of the Bruce Hotel and Casino over the next twelve
months and beyond. The Bruce Hotel and Casino is located at Jiron 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 Bruce
Hotel and Casino is a destination hotel and casino location for visitors
traveling to the Republic of Peru, including tourists from the Peoples Republic of
China. The casino and slot room are also popular with local residents in Peru.

15

---

The Bruce Hotel & 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.

| | Hotel
| | -----

The
Bruce Hotel & Casino is a 60 room full service hospitality facility with standard and
premium lodging accommodations (rooms and suites) and dining facilities. The amenities
include guest suites and rooms, sauna, air conditioning, mini-bar, 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 offers a gaming room, meeting/banquet
facilities and a barber/beauty shop. The room fare 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 Bruce 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
Bruce Hotel and Casino is located on commercial property and is located on a major
thoroughfare. Our casino and restaurants 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 and 2005. Our occupancy rate is not generally subject to seasonal fluctuation.
The following table sets forth the occupancy rate for our hotel during 2005 and the first
seven months of 2006:

|Hotel Average Occupancy Rate
|----------------------------
|
|                            
|January                     
|February                    
|March                       
|April                       
|May                         
|June                        
|July                        
|August                      
|September                   
|October                     
|November                    
|December                    

| | Restaurants
| | -----------

The
Bruce Hotel & Casino featured two full service restaurants serving Chinese and
international cuisine. The restaurants seated 200 guests, respectively. The Bruce Hotel
& Casino holds a retail liquor license. The restaurants were closed for renovation in
November 2005.

| | Gaming
Casino
| | -------------

The
gaming casino is a full featured casino with 20 traditional gaming tables (blackjack,
roulette, craps and poker) and approximately 220 slot machines. The casino is located on
the second floor of the Hotel and is approximately 622 square meters. The casino features
two full bars, VIP area and can 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.

16

---

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 fourth quarter of 2006 or first quarter of 2007, assuming adequate financing is available.

| | Slot
Room
| | ---------

The
slot room is located on the first floor of the Hotel next to the lobby. The slot room
features 220 slot machines and can accommodate approximately 300 guests. The slot room
was closed for renovation in November 2005. As of June 30, 2006, we have 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. We expect to lease out
essentially all of the old slot machines in the next few months. 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.

| | Real
Property
| | -------------

Kubuk
owns all of the real property and assets used in the operation of the Bruce 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 Bruce Hotel and
Casino.

The
renovation of our casino, slot room and restaurants are expected to be completed in the
fourth quarter of 2006 or first quarter of 2007, assuming financing is available. We expect to raise approximately $5
million to complete the renovations.

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

|               
|---------------
|
|               
|Casino         
|               
|Rooms          
|               
|Food & Beverage
|               
|Other          
|               
|Total          
|               

Gaming Devices and Software

Subsequent
to June 30, 2006, we entered into an exclusive world-wide license agreement to
license technology to manufacture slot machines developed by K.C. Technology, a Hong Kong
corporation.  We issued K.C. Technology 3,000,000 shares of common stock and paid an
initial licensing fee of $500,000 in July 2006.  We also agreed to pay K.C. Technology an
additional $2 million in four equal installments payable every six months beginning
January 31, 2007, and to issue K.C. Technology 3,000,000 additional shares of common
stock in two 1,500,000 share installments on the first and second anniversary.  We intend
to raise capital to manufacture, sell, lease or profit-share slot machines beginning in the fourth quarter of
2006 or early 2007. We raised $500,000 to pay the initial license fee by issuing 666,666
units at $0.75 per unit in July 2006.  Each unit consisted of one share of common stock
and one share purchase warrant exercisable to acquire one share of common stock at $0.75
per share for one year. We anticipate that we will require at least $1.2 million to fund
our plan of opeartions related to manufacturing and selling or leasing slot machines
during the next twelve months.  See Liquidity and Capital Resources, below.

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 $115,000 on
software development during the next 12 months, assuming adequate financing is available.
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.

# Satisfaction of cash
obligations for the next twelve months.

Aside
from the cash requirements for the Bruce Casino renovation projects, we believe that the
cash flow from our hotel and the rental of the old slot machines will not be sufficient to meet our
minimum operating cash requirements to
continue as a going concern for the next twelve months. 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
$3,500,000. As of June 30, 2006, we raised
approximately $2,000,000, we have allocated $1,000,000 of the proceeds of the offering to
renovate our casino floor and $1,000,000 toward marketing efforts to promote our business.
We intend to secure additional financing in the amount of $6,500,000 in one or more
transactions as soon as practicable. These financing transactions may involve
collateralized borrowing, equity securities offerings, or a combination of both. We intend
to use the proceeds from these transactions, if any, to expand, renovate and modernize the
current facilities of the Bruce Hotel and Casino and to capitalize our slot machine business.
We expect to fund the remaining cash requirement of the renovation and acquisition of new
equipment through additional capital infusions, including the proceeds from the exercise
of the Class A warrants, if any, and future offerings. If we are unable to raise the funds
to complete the renovations in debt or equity transactions, 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, and cannot assure
you that such financing will be available.

17

---

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.

Prior
to the completion of renovation and 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               | 
|Total                               | 

We acquired exclusive rights to
manufacture and sell cost-competitive slot machines.  We intend to manufacture and and distribute
the slot machines in central and south American
markets beginning in the fourth quarter of 2006 or early 2007.
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 $1.2 million additional
financing for our slot machines business in the next 12 months.

The total slot machine 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.

# Significant changes in
number of employees.

We
anticipate that we will hire approximately 50 to 70 employees prior to reopening our
casino, slot room, and restaurant in the fourth quarter of 2006 or first quarter of 2007, assuming adequate financing
is available.

# Results of Operations
for the Three and Six Months Ended June 30, 2006 and 2005.

The
Company had revenues of $415,268 ($1,253,578  2005) during the three months ended June 30, 2006,
and revenues of $767,227 ($2,661,695  2005) during the six months ended June 30, 2006.  Overall revenues were down 67% for
the three-month comparative periods and 71% for the six-months periods. The lower revenues during the periods in
2006 compared to 2005 are a direct result of the closure of the Companys casino
floor for renovation in March 2005 and subsequent closure of the slot room in November
2005. The restaurant in the third floor of Bruce Hotel was also closed to the public
shortly after the closure of the slot room.

Operating
expenses during the three months ended June 30, 2006 were $993,955 ($593,144  2005),
and $1,687,143 ($1,332,357  2005) during the six-month period ended June 30, 2006.
Despite substantial reduction in labor and other variable
costs associated with the closure of the casino and slot room since 2005, operating
expenses for the first half of 2006 increased by $354,786 due to increased marketing expenses,
legal and accounting costs and $230,000 amortization of consulting service expense, prepaid by issuance of our stock to a
service provider during the second quarter of 2006. We had no legal and other SEC
compliance costs in the first half of  2005 at Kubuk, or its predecessor Bruce
Grupo Diversion SAC. Consequently, loss from operation for the three-month period ended
June 30, 2006 was $(578,687), compared to income from operation in the amount of $660,434
for the same period in 2005. Income (loss) from operation as a percentage of revenue for
the three-month periods ended June 30, 2006 and 2005 was (139)% and 47%, respectively.
Our net loss from operation for the six-month period ended June 30, 2006 was $(919,916), compared to income from operation in the
amount of $1,329,338 for the same period in 2005. Income (loss) from operation as a percentage of revenue for the three-month periods
ended March 31, 2006 and 2005 was (20)% and 50%, respectively. The
lower income from operation during the period in 2006 compared to 2005, was a
direct result of the closure of the Companys casino floor and slot room in 2005 for
renovation and the increased public company compliance costs following the reverse merger
transaction in July 2005.

18

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Net
loss, after other income and expenses and provision for income taxes, was $(588,101) (a
net loss of $0.01 per share) for the three-month period ended June 30, 2006, compared to
net income of $566,618 ($0.01 per share) for the three months ended June 30, 2005. The
Company paid income taxes of $17,008 and $100,010 for the three-month periods ended
June 30, 2006 and 2005, respectively.

Net
loss, after other income and expenses and provision for income taxes, was $(936,135) (a
net loss of $0.02 per share) for the six-month period ended June 30, 2006, compared to
net income of $955,042 ($0.01 per share) for the six-month period ended June 30, 2005.
The Company paid income taxes of $133,946 and $407,058 for the six-month periods ended
June 30, 2006 and 2005, respectively.

The
Company had a loss on foreign currency translation of $(362) during the three-month
period ended June 30, 2006, compared to a $262,443 gain during the same period in 2005.

The
Companys revenues during the periods after the closure of the Companys slot
room and restaurant in November 2005 was principally derived from hotel revenue and
revenue from rental of old
slot machines. The Company does not anticipate that revenues will return to historical
levels until the renovation of its casino floor is completed. The Company has several
fixed costs related to its operations, which resulted in higher operating expenses and
lower operating revenue as a percentage of sales. The Company anticipates that its
expenses as a percentage of sales will remain at approximately the same level until its
casino floor is fully operational. The Company is currently seeking to raise $5 million to
renovate and modernize the current facilities of the Bruce Hotel & Casino. The Company
has no firm commitments to raise such capital to complete such renovations.

In
addition, we entered into a Licensing Agreement with K.C. Technology, a Hong Kong
corporation, under which the registrant acquired from K.C. a worldwide exclusive and
perpetual license to use K.C.s technology to manufacture, market and distribute K.C.
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 K.C. 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 also agreed to pay Licensor 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 K.C. 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 K.C. under the License Agreement.  We intend to
market, sell, lease or profit-share slot machines beginning in the fourth quarter of 2006 or first quarter of
2007.  We anticipate that we will need to raise at least $1.2 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

The Company is in the process of completing a comprehensive
renovation of the Bruce Hotel & Casino and will
require additional capital to complete the remodel of the casino and resume operations of
the casino floor. The Company is currently seeking to raise $5 million in capital to
complete the renovation, and anticipates it will require an additional $1.5 million for
working capital and to fund its slot machine business during the next 12 months.

The Company intends to market, sell, lease or profit-share slot machines beginning in the fourth
quarter of 2006 or first quarter of 2007. The Company anticipates that it will need to
raise at least $1.2 million in additional capital to fund our plan of operation related
to our slot machine business.  The Company also has commitments to make payments of
$500,000 each January and June to K.C. Technology under the terms of the License
Agreement.  If the Company fails to make such payments, the Company will default under
the terms of the 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. The Company has no firm
commitments for such financing.

Cash
flow from operations during the three months ended June 30, 2006, were significantly
lower than cash flow from operations during the same period in 2005. The Companys
revenues during the periods after the closure of the Companys slot room and
restaurant in November 2005 was principally derived from hotel and rental of old slot
machines. The Company does not anticipate that revenues will return to historical levels
until the renovation of its casino floor is completed. The Company has several fixed costs
related to its operations, which resulted in higher operating expenses and lower operating
revenue as a percentage of sales. The Company anticipates that its cash flow from
operations will remain at approximately the same level until its casino floor is fully
operational.

As
of June 30, 2006, the Company had current assets of $1,371,808, including cash and cash
equivalents of $794,337, and current liabilities of $286,981. The Company had working
capital of $1,084,827. We have commitments and contractual obligations for the Company during
the next 12 months of $830,000.  The Company did not have any long-term debt as of June 30, 2006.

The
cash flow from Peruvian operation is insufficient to sustain our operational cash flow requirements.
We are incurring a cash burn rate of approximately $150,000 every
quarter.  For the first half of 2006, net of Peruvian income, we have used $160,000 and
$130,000 in the first and second quarter, respectively.  This cash burn rate is expected to
sustain for the next twelve months and beyond.  To address this ongoing concern, we
continue to seek additional funding both from private equity and other alternative
resources.  On August 14, 2006, we raised an additional $500,000,
which accounts to a portion of our total private placement in the second round.  We
 expect holders of Class A warrants to exercise their warrants,
which are in the money, and is expected to provide approximately $2.6 million in proceeds
to us.

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. 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

19

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renovations, we may reopen portions
of our gaming operation in stages as renovations are completed beginning with our casino
floor then our slot room.

During
the quarter ended March 31, 2006, we made a $60,000 short-term loan to Szchuan Enterprises, Ltd.
Yong Yang is an affiliate of Szchuan Enterprises, Ltd. and a director of CRH. Subsequently,
the entire balance of $61,317, which accounts for the principal and interest was paid off
on July 19, 2006.

We
anticipate that we will require $800,000 to complete renovation of our casino floor and
$1,080,000 to purchase gaming equipment. We do not expect to reopen our slot room
until we raise $1.4 million in additional financing to purchase slot machines.
We estimate the costs to complete renovation of our restaurant
and lounge will be approximately $220,000. We do not have sufficient cash flow
and working capital to complete our renovations.  We 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. We estimate that 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, 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 should 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
anticipate that we will be able to complete the renovation of our casino, slot room, and
restaurant in the second half of 2006 or first quarter of 2007, assuming we are able to raise adequate financing
prior to the end of September 2006. We are currently negotiating with potential investors to
raise such funds; however, we currently do not have any firm commitments for such
financing. If we are unable to raise sufficient capital through equity financing, we may
seek to mortgage our real property and assets. We estimate that we can complete the
renovations in 3-5 months after we receive sufficient funding.

In
addition, we intend to market, sell, and profit-share slot machines beginning in the
fourth quarter of 2006 or first quarter of 2007.  We anticipate that we will need to
raise at least $1.2 million in additional capital to fund our plan of operation related
to our slot machines business during the next 12 months.  We are not planning on
establishing our own manufacturing facility for the production of Kubuk gaming machines. We
intend to contract with third-party manufacturers in order to manufacture our
machines until we establish our slot machine and gaming device business.  This is
anticipated to reduce our expenditures on equipment, capital and fixtures, labor and
leasehold expenses.

The
Company also has commitments to make payments of $500,000 each January and June to K.C.
Technology under the terms of the License Agreement.  If the Company fails to make such
payments, the Company will default under the terms of the 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.

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.

# Off-Balance Sheet
Arrangements

The
Company had no off-balance sheet transactions.

20

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# Subsequent Events

Stock Split

The
board of directors of the Company authorized and approved a 2 for 1 forward stock split
of its issued and outstanding shares of common stock, par value $0.001 per share, by way
of share dividend. Pursuant to Section 78.215 of the Nevada General Corporation Law,
shareholder approval of the share dividend was not required.

To
effect the share dividend, the Company authorized the issuance of one share of common
stock for each one outstanding share of common stock held by the shareholders of record on
July 5, 2006 at 5:00 p.m. (Eastern Time) (the Record Date).
The Companys transfer agent issued new share
certificates giving effect to the share dividend and mailed such stock certificates directly
to shareholders on or about July 7, 2006.

Immediately
prior to the stock dividend, the Company had 21,840,667 shares of common stock issued and
outstanding. After giving effect to the stock dividend, the Company will have 43,681,334
shares of common stock issued and outstanding. The Company will begin trading on a post
dividend basis at the open of the market July 10, 2006.

K.C. Licensing Agreement

On July 7, 2006 (the Effective
Date), the Company entered into a License Agreement (the License
Agreement) with K.C. Technology, a Hong Kong corporation (Licensor),
under which the Company acquired from Licensor a worldwide exclusive and perpetual license
to use Licensors technology to manufacture, market and distribute Licensor 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, know-how.

The
Company agreed to pay Licensor a cash license fee of $2,500,000, of which, $500,000 was
paid within seven days of the Effective Date, 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.

The
Company also agreed to pay Licensor a licensee fee in common stock of 6,000,000 shares of
restricted common stock, par value $0.001, of which 3,000,000 was 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 Company granted Licensor 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 Licensor under the License Agreement.

The
Company will also pay a royalty of $20.00 for each Smartbook sold by the Company.

The License
Agreement commences on the Effective Date and shall continue until terminated by the
Company in the event of any default by Licensor. If Licensor defaults under the License
Agreement, in addition to other remedies or right it has at law or in equity, the Company
may terminate the License Agreement, cancel the issuance of unissued common shares, cancel
the payment of unpaid license fee and cease to pay royalties. The Company shall also be
entitled to the return of the license fee and royalties it has paid up to the occurrence
of Licensors default.

Licensor
may terminate the License Agreement if the Company fails to issue the shares or make the
payments of license fee on time and fails to cure such default within ninety (90) days
after receiving a written notice from Licensor of such default.

The
License Agreement cannot be assigned by either Licensor or Company without other
partys prior written consent, except that the Company may assign its rights and
obligations thereunder to any affiliates or subsidiaries or in connection with a merger,
acquisition or sale of substantially all of the assets to which the License Agreement
relates. The License Agreement is contingent on any necessary approvals and licenses from
any regulatory authorities having jurisdiction over Licensor and the Company or the
subject matter thereof.

Unit Placement

The Company has completed the offer
and sale of 666,666 units of the Company, at a price of $0.75 per unit for gross proceeds
of $500,000. Each unit consisted of one share of the Companys common stock, par
value $0.001, and one non-transferable share purchase warrant which entitles the purchaser
to subscribe for one additional common share at a price of $0.75 per share by the first
anniversary of the date of issuance. The offering of units was conducted by the Company in
a private placement to non-U.S. persons outside the United States pursuant to an exemption
from registration available under Rule 903 of Regulation S of the United States Securities
Act of 1933, as amended.

# 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 December 31, 2005, 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.

21

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# PART II  OTHER
INFORMATION

Item 1.   
Legal Proceedings
        Not applicable.

# Item 1A.    Risk Factors

As
of May 15, 2006, there have been no material changes from risk factors as previously
disclosed in the Companys Form 10-KSB, filed March 31, 2006.

Item 2.    Unregistered Sales of
Equity Securities and Use of Proceeds

On
July 5, 2006, the board of directors of the Company authorized and approved a 2 for 1
forward stock split of its issued and outstanding shares of common stock, par value
$0.001 per share, by way of share dividend. Pursuant to Section 78.215 of the Nevada
General Corporation Law, shareholder approval of the share dividend was not required. To
effect the share dividend, the Company authorized the issuance of one share of common
stock for each one outstanding share of common stock held by the shareholders of record
on July 5, 2006 at 5:00 p.m. (Eastern Daylight Saving Time) (the Record Date).
The Companys transfer agent is authorized and directed to issue new share
certificates giving effect to the share dividend and mail such stock certificates
directly to shareholders of the Company. Certificates were mailed on or about July 7,
2006.

On
July 7, 2006, the Company has completed the offer and sale of 666,666 units of the
Company, at a price of $0.75 per unit for gross proceeds of $500,000. Each unit consisted
of one share of the Companys common stock, par value $0.001, and one
non-transferable share purchase warrant which entitles the purchaser to subscribe for one
additional common share at a price of $0.75 per share by the first anniversary of the
date of issuance. The offering of units was conducted by the Company in a private
placement to non-U.S. persons outside the United States pursuant to an exemption from
registration available under Rule 903 of Regulation S of the United States Securities Act
of 1933, as amended.

On
July 7, 2006, the Company issued 3,000,000 shares of common stock to one non-U.S. person
in an off-shore transaction as a licensing fee. The offering of units was conducted by
the Company in a private placement to non-U.S. persons outside the United States pursuant
to an exemption from registration available under Rule 903 of Regulation S of the United
States Securities Act of 1933, as amended.

Item 3.    Defaults Upon
Senior Securities

Not
Applicable

Item 4.    Submissions of Matters to a
Vote of Security Holders.

No
matters were submitted to a vote of security holders during the quarter ended June 30,
2006.

# Item 5.    Other Information

None.

# Item 6.    Exhibits

|A) |  | Exhibits
|-- |  | --------

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

| | 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
| | ---- |  | ------------------------------------------------------------------------------------------

22

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# 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:   August 16, 2006

By:  /s/ Winston Yen
      __________________________________________
       Winston Yen
             Chief Financial Officer
       (Principal Financial and Accounting Officer)

Date:   August 16, 2006

23

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