UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549

# FORM 10-QSB

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

| | For
the quarterly period ended:   March 31, 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 May 12, 2006 there were
21,840,667 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 March 31, 2006                                                  
|
|                               |  | Condensed Consolidated Statement of Operations for three months ended March 31, 2006 and 2005
of Operations
|
|                               |  | Condensed Consolidated Statement of Cash Flows for three months ended March 31, 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 1A.                       |  | Risk Factors                                                                                               
|
|Item 5                         |  | Other Information                                                                                          
|
|Item 6                         |  | Exhibits                                                                                                   
|
|22                             | 

2

---

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

|                                                            | As of
March 31, 2006
|----------------------------------------------------------- | --------------------
|                                                            |                     
|ASSETS                                                      |                     
|Current Assets                                              |                     
|Cash                                                        |                     
|Accounts receivable, net of allowance for doubtful accounts |                     
|of $ 0 as of March 31, 2006                                 |                     
|Notes receivable                                            |                     
|Inventory                                                   |                     
|Prepaid expense & other current assets                      |                     
|VAT tax recoverable                                         |                     
|                                                            |                     
|Total Current Assets                                        |                     
|                                                            |                     
|                                                            |                     
|Property, furniture & equipment,                            |                     
|net of accumulated depreciation of $6,775,957               |                     
|as of March 31, 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 LAIBILITIES                                           |                     
|                                                            |                     
|                                                            |                     
|Shareholders' Equity                                        |                     
|Common stock: $.001 par value, 100,000,000 authorized       |                     
|shares, 21,840,667 shares issued and outstanding            |                     
|Additional Paid-in Capital                                  |                     
|Prepaid Stock Compensation                                  |                     
|Accumulated Deficits                                        |                     
|Accumulated Foreign Currency Adjustment                     |                     
|                                                            |                     
|Total Shareholders' Equity                                  |                     
|                                                            |                     
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                  |                     
|                                                            |                     

(UNAUDITED  SEE ACCOMPANYING NOTES)

3

---

CHILCO RIVER HOLDINGS INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS & 
OTHER COMPREHENSIVE INCOME
(Expressed in US$)

|                                         | For the Quarter
      Ended     
March 31, 2006 | For the Quarter  
     Ended       
March 31, 2005
|---------------------------------------- | ----------------------------------------------- | --------------------------------------------------
|                                         |                                                 |                                                   
|Revenues                                 |                                                 |                                                   
|Casino                                   |                                                 |                                                   
|Rooms                                    |                                                 |                                                   
|Food and Beverage                        |                                                 |                                                   
|Entertainment                            |                                                 |                                                   
|Other                                    |                                                 |                                                   
|                                         |                                                 |                                                   
|                                         |                                                 |                                                   
|Less:Promotional Allowances              |                                                 |                                                   
|                                         |                                                 |                                                   
|Total Revenues                           |                                                 |                                                   
|                                         |                                                 |                                                   
|                                         |                                                 |                                                   
|Operating Expenses                       |                                                 |                                                   
|Operating departments                    |                                                 |                                                   
|General and administrative               |                                                 |                                                   
|Depreciation                             |                                                 |                                                   
|                                         |                                                 |                                                   
|Total Operating Expenses                 |                                                 |                                                   
|                                         |                                                 |                                                   
|Income (Loss) from Operations            |                                                 |                                                   
|                                         |                                                 |                                                   
|                                         |                                                 |                                                   
|Other Income and Expenses                |                                                 |                                                   
|Interest income                          |                                                 |                                                   
|Other income/gains                       |                                                 |                                                   
|Other expenses/losses                    |                                                 |                                                   
|                                         |                                                 |                                                   
|                                         |                                                 |                                                   
|                                         |                                                 |                                                   
|                                         |                                                 |                                                   
|Income (Loss) before income tax          |                                                 |                                                   
|Provision for income tax - Note 9        |                                                 |                                                   
|                                         |                                                 |                                                   
|Net Income (Loss)                        |                                                 |                                                   
|Other Comprehensive Income               |                                                 |                                                   
|Unrealized gain (loss) on                |                                                 |                                                   
|Foreign Currency Translation, net of tax |                                                 |                                                   
|                                         |                                                 |                                                   
|Total Comprehensive Income (Loss)        |                                                 |                                                   
|                                         |                                                 |                                                   
|Basic Earnings Per Share                 |                                                 |                                                   
|Diluted Earnings Per Share               |                                                 |                                                   
|Weighted Average Shares Outstanding      |                                                 |                                                   

(UNAUDITED  SEE ACCOMPANYING
NOTES)

4

---

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

|                                                   | For the Quarter
      Ended     
March 31, 2006 | For the Quarter  
     Ended       
March 31, 2005
|-------------------------------------------------- | ----------------------------------------------- | --------------------------------------------------
|                                                   |                                                 |                                                   
|Cash Flows from Operating Activities               |                                                 |                                                   
|Net Income (Loss)                                  |                                                 |                                                   
|Adjustments to reconcile net income to cash flows  |                                                 |                                                   
|from operating activites                           |                                                 |                                                   
|Depreciation                                       |                                                 |                                                   
|Prepaid expense via stock issuance                 |                                                 |                                                   
|(Increase)/Decrease in account balances of:        |                                                 |                                                   
|Accounts Receivable                                |                                                 |                                                   
|Inventory                                          |                                                 |                                                   
|Prepaid expense & other current assets             |                                                 |                                                   
|Deferred tax assets                                |                                                 |                                                   
|Accounts payable                                   |                                                 |                                                   
|Accrued expenses and other payables                |                                                 |                                                   
|Foreign Taxes Payable                              |                                                 |                                                   
|                                                   |                                                 |                                                   
|Cash Flows from Operating Activities               |                                                 |                                                   
|                                                   |                                                 |                                                   
|                                                   |                                                 |                                                   
|Cash Flows Used by Investing Activities            |                                                 |                                                   
|Cash paid for construction in progress             |                                                 |                                                   
|                                                   |                                                 |                                                   
|Cash Used by Investing Activites                   |                                                 |                                                   
|                                                   |                                                 |                                                   
|                                                   |                                                 |                                                   
|Cash Flows from Financing Activities               |                                                 |                                                   
|Cash proceeds from shareholder loans               |                                                 |                                                   
|Cash repayment for shareholder loans               |                                                 |                                                   
|Cash paid for dividend                             |                                                 |                                                   
|Cash proceeds from subscribed capital              |                                                 |                                                   
|Cash lent to affiliate company                     |                                                 |                                                   
|                                                   |                                                 |                                                   
|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)

5

---

# Chilco River Holdings,
Inc. 
Notes To The Condensed Consolidated Financial Statements 
March 31, 2006

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-month period ended March, 31, 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.

|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
properties were returned to the transferor in April, 2006 and the Company no longer
holds any interest in mineral claims or properties.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 made to the transferred assets. Furthermore, in accordance
with Article 11-01(d)
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

---

# Chilco River Holdings,
Inc. 
Notes To The Condensed Consolidated Financial Statements 
March 31, 2006

| | 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 conducted all other gaming
activities of Bruce Hotel/Casino until November 2005. 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. After completion of the transactions under the
reorganization agreement, 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

# Chilco River Holdings,
Inc. 
Notes To The Condensed Consolidated Financial Statements 
March 31, 2006

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

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

8

---

# Chilco River Holdings,
Inc. 
Notes To The Condensed Consolidated Financial Statements 
March 31, 2006

| | 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 three
months ended March 31, 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

9

---

# Chilco River Holdings,
Inc. 
Notes To The Condensed Consolidated Financial Statements 
March 31, 2006

| | 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 March 31,
2006, the Company had an exposure in the amount of $68,624 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 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
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

# Chilco River Holdings,
Inc. 
Notes To The Condensed Consolidated Financial Statements 
March 31, 2006

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

| | In
December 2005 the SECs advisory committee on small business recommended that the SEC
allow most companies with market values of less than $700 million to avoid having their
internal controls certified by auditors. The advisory committee recommended that most
companies with market capitalizations under $100 million be exempted totally. It further
recommended that companies with market capitalizations of $100 million to $700 million not
face audits of internal controls. Some companies with large revenues but low market values
would still be required to comply with the act. There can be no assurances that these
proposals or similar proposals will be adopted.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

11

---

# Chilco River Holdings,
Inc. 
Notes To The Condensed Consolidated Financial Statements 
March 31, 2006

| | 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
3.382:1 and 3.261:1 on March 31, 2006 and 2005, respectively, while the results of
operations are translated into US Dollars equivalents using the weighted average exchange
rates for each quarter presented.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | As of March 31, 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

---

# Chilco River Holdings,
Inc. 
Notes To The Condensed Consolidated Financial Statements 
March 31, 2006

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

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

| | During
the third quarter ended December 31, 2005, we issued a notice of default under the terms
of the Escrow Agreement related to an aggregate of 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 company for cancellation and cancelled
during the quarter ended March 31, 2006.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

---

# 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 5, 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;
| | - |  | -------------------------------------------------------------------------

| |  |  | 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; and
| | - |  | -------------------------------------------

| |  |  | access
to capital markets.
| | - |  | --------------------------

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.

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 March 31,
2006, and our results of operations and cash flows for the three-month periods ended March
31, 2006. The results of operations for the three-month periods ended March 31, 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

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
three 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 last half of 2006, 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 March 31, 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 pre 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
last half of 2006, 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          
|               

# 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 is 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
$4,500,000. As of March 31, 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 $5,000,000 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.
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.

In April 2006 we started a software development project in Shenzhen, China
by contracting several programmers to develop an internet based computer
gaming application for the potential future licensing to
interested 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.

# 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               | 

The
Company is in preliminary negotiation with a slot machine manufacturer based in Hong Kong
for a proposed transaction under which the Company may acquire exclusive rights to
manufacture low price slot machines and distribute them in central and south American
markets. We are only in preliminary discussions with the manufacturer and do not have any
definitive agreement with respect to these rights.

# 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 second half of 2006, assuming adequate financing
is available.

# Results of Operations
for the Three Months Ended March 31, 2006 and 2005.

The
Company had revenues of $351,959 during the three months ended March 31, 2006, compared to
revenues of $1,408,116 during the same period in 2005. Overall revenues were down 75% for
the three-month comparative periods. The lower revenues during the three-month period 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 March 31, 2006 were $693,189, compared to $739,212
for the same period in 2005. 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 quarter of 2006 decreased by only $46,024 due to increased marketing expenses,
including legal and accounting costs, $100,000 in expenses under our marketing program, and
$115,000 amortization of consulting service expense, prepaid by issuance of our stock to a
service provider during the first quarter of 2006. We had no legal and other SEC
compliance costs in the three-month period in 2005 at Kubuk, or its predecessor Bruce
Grupo Diversion SAC. Consequently, loss from operation for the three-month period ended
March 31, 2006 was $(341,230), compared to income from operation in the amount of $668,904
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 (97)% and 48%, respectively. The
lower income from operation during the three-month 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

---

Net
loss, after other income and expenses and provision for income taxes, was $(348,034) (a
net loss of $0.02 per share) for the three-month period ended March 31, 2006, compared to
net income of $398,424 ($0.01 per share) for the three months ended March 31, 2005. The
Company paid income taxes of $12,662 and $307,048 for the three-month periods ended March
31, 2006 and 2005, respectively.

The
Company had a loss on foreign currency translation of $(7,219) during the three-month
period ended March 31, 2006, compared to a $(208,752) loss 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. If the Company
is successful in raising the capital required for the renovations, the Company may
temporarily close its entire operations for up to two months to complete the renovation.
Such a closure is expected to have a material impact on the results of operations during
the periods in which the operations are suspended. However, the Company anticipates that
renovation will improve the Companys revenues and profitability when complete.

# Liquidity and Capital
Resources

The
Company believes it will have sufficient cash flows from operations to fund its working
capital requirements. However, the Company is in the process of completing a comprehensive
renovation of the Bruce Hotel & Casino to improve its results of operations 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. The Company has no firm commitments to for such financing.

As
of March 31, 2006, we had no major indebtedness. At the beginning of the quarter ended
March 31, 2006, we had outstanding loans from a major shareholder, David Liu, and a
California company solely owned by Mr. Liu. These loans were created as Mr. Liu made
advance payments for our web design fees, legal and accounting expenses, travel expenses,
and casino renovation costs during the year ended December 31, 2005. The loans are
evidenced by loan agreements and promissory notes bearing zero interest. The outstanding
balance on these loans at the beginning of the quarter were $97,289 to Mr. Liu and $96,742
to his California company. We fully repaid these loans in January 2006.

Cash
flow from operations during the three months ended March 31, 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 March 31, 2006, the Company had current assets of $1,914,584, including cash and cash
equivalents of $1,448,385, and current liabilities of $20,913. The Company had working
capital of $1,893,617. We have commitments and contractual obligations for the Company during
the next 12 months of $665,000.  The Company did not have any long-term debt as of March 31, 2006.
Aside from cash requirement for the renovation of the casino and hotel, the Company
believes that its cash flow from operations and its working capital will be sufficient to
fund its operating cash requirements for the next twelve months and beyond.

We
currently have no alternative sources of funding, and we currently rely on cash flow from
our hotel 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

---

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.

We
anticipate that the current $1 million funding allocated towards renovations will only be
sufficient to fund renovation of our casino floor and purchase of gaming equipment, which
is estimated to cost approximately $900,000. We do not expect to reopen our slot room
until we raise $2.7 million in additional financing to purchase slot machines for our
slot room. Total costs to renovate our slot room and purchase slot machines is
approximately $2.8 million. We estimate the costs to complete renovation of our restaurant
and lounge will be approximately $300,000. While we have sufficient cash flow and working
capital to reopen our casino floor in the second half of 2006, we do not believe we have
sufficient cash flow and working capital to completely renovate our slot room or
restaurants if the required funding is not raised through additional financing or equity
sources. In which case we will reopen the restaurant, which facilities have been kept
intact during the temporary closure and are still used to serve meals to hotel guests, to
the public and casino patrons along with the reopening of the casino floor. 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
believe that we have sufficient cash flows from the operation of our hotel and the rental
of old slot machines  to continue as a
going concern even without our casino, slot room, and restaurant operations.

We
anticipate that we will be able to complete the renovation of our casino, slot room, and
restaurant in the second half of 2006, assuming we are able to raise adequate financing
prior to the end of July 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.

# Off-Balance Sheet
Arrangements

The
Company had no off-balance sheet transactions.

# Subsequent Events

As
of date of this 10-QSB filing, there are no material subsequent events.

# Item 3.    Controls and
Procedures

We
maintain disclosure controls and procedures which are adequately designed to ensure that
information required to be disclosed in reports filed under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within time periods
specified in the applicable rules and forms. As of the end of the period covered by this
report, our responsible officers evaluated the effectiveness of our disclosure controls
and procedures. Based on the evaluation, which disclosed no significant deficiencies or
material weaknesses, our responsible officers concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed in the
reports that we file or submit under the Exchange Act is accumulated and

20

---

communicated to our management,
including our chief executive officer and chief financial officer, to allow timely
decisions regarding required disclosure.

There
were no significant changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

# PART II  OTHER
INFORMATION

# Items 1 through 4 of Part
II are 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 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
| | ---- |  | ------------------------------------------------------------------------------------------

21

---

# SIGNATURES

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

# Chilco River Holdings
Inc.

By:  /s/ Tom Yu Liu
      __________________________________________
       Tom Yu Liu
             Chief Executive Officer
       (Principal Executive Officer)

Date:   May 15, 2006

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

Date:   May 15, 2006

22

---