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

                                   FORM 10-QSB

[X]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

     For the quarterly period ended: September 30, 2006

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


                             Commission file number:


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

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


          355 LEMON AVENUE, SUITE C                               91789
                WALNUT, CA 91789                                (zip code)
     (Address of principal executive offices)


                    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 [X]     No [ ]

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

                            Yes [ ]     No [X]


As  of  November  14,  2006  there  were  47,848,000   shares  of  common  stock
outstanding.

Transitional Small Business Disclosure Format (check one)

                            Yes [ ]     No [X]



<PAGE>

                           CHILCO RIVER HOLDINGS INC.
                    QUARTERLY REPORT FOR SEPTEMBER 30, 2006
                                     INDEX


                                                                            Page

Part I - FINANCIAL INFORMATION

Item 1    Unaudited Condensed Consolidated Financial Statements ..............1

          Condensed Consolidated Balance Sheet as of
          September 30, 2006 .................................................1

          Condensed Consolidated Statement of Operations for three
          and nine months ended September 30, 2006 and 2005 ..................2

          Condensed Consolidated Statement of Cash Flows for nine
          months ended September 30, 2006 and 2005 ...........................3

          Notes to Unaudited Condensed Consolidated Financial Statements .....4

Item 2    Plan of Operation .................................................10

Item 3    Controls and Procedures ...........................................17

Part II - OTHER INFORMATION

Item 1.   Legal Proceedings .................................................18

Item 1A.  Risk Factors ......................................................18

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds .......18

Item 3.   Defaults Upon Senior Securities ...................................18

Item 4.   Submissions of Matters to a Vote of Security Holders ..............18

Item 5    Other Information .................................................18

Item 6    Exhibits ..........................................................18

Signatures ..................................................................19


                                       i

<PAGE>



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



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


<TABLE>
                                                                                 September 30,
                                                                                     2006
                                                                                ==============
<S>                                                                             <C>
 ASSETS
 Current Assets
 Cash                                                                           $    534,376
 Accounts receivable, net of allowance for doubtful accounts
   of $ nil as of September 30, 2006                                                 109,085
 Inventory                                                                           213,217
 Prepaid expense & other current assets                                              140,088
 VAT tax recoverable                                                                 107,145
                                                                                --------------
 Total Current Assets                                                              1,103,911
                                                                                --------------

 Property, furniture & equipment,
   net of accumulated depreciation of $7,145,046
   as of September 30, 2006                                                       16,903,464
                                                                                --------------
 Intangible Asset, net of accumulated amortization of $115,776                     9,146,324
 Non Current Deferred Tax Asset                                                      116,666
                                                                                --------------
 Total Other Assets                                                                9,262,990
                                                                                --------------
 TOTAL ASSETS                                                                   $ 27,270,365
                                                                                ==============

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current Liabilities
 Accounts payable                                                               $    227,773
 Accrued expenses and other payables                                                   9,148
 Loan from affiliates                                                                 55,558
 Customer Deposit                                                                    100,000
 Installment payable                                                               2,617,589
                                                                                --------------
 Total Current Liabilities                                                         3,010,067
 Long-Term Liability                                                               2,334,511
                                                                                --------------
 Installment Payable                                                               5,344,578
                                                                                --------------
 TOTAL LIABILITIES

 Shareholders' Equity
 Common stock: $.001 par value, 100,000,000 authorized
 shares, 47,348,000 shares issued and outstanding                                     47,348
 Additional Paid-in Capital                                                       24,364,840
 Prepaid Stock Compensation                                                       (1,035,000)
 Subscribed Capital                                                                  500,000
 Accumulated deficit                                                             (2,061,9260)
 Accumulated Foreign Currency Adjustment                                             110,525
                                                                                --------------
 Total Shareholders' Equity                                                       21,925,787
                                                                                --------------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                     $ 27,270,365
                                                                                ==============
</TABLE>


                      (Unaudited -- See Accompanying Notes)


                                       1

<PAGE>


<TABLE>
                                                     CHILCO RIVER HOLDINGS INC.
                                        CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                                         (Expressed in US$)


                                                     Three Months Ending             Nine Months Ending
                                                        September 30,                  September 30,

                                                     2006            2005          2006           2005
                                                 -----------     -----------   -----------     -----------
<S>                                               <C>              <C>          <C>              <C>
Revenues
Casino                                                  --       $ 583,834     $        --     $ 2,333,701
Slot machine leasing                               116,133              --         288,510              --
Rooms                                              284,852         282,003         828,734         896,586
Food and Beverage                                   21,656         231,336          72,624         466,312
Other                                                   --             (50)             --          62,219
                                                 -----------     -----------   -----------     -----------
Less: Promotional Allowances                            --              --              --              --
                                                 -----------     -----------   -----------     -----------
Total Revenues                                     422,640       1,097,123       1,189,868       3,758,818
                                                 -----------     -----------   -----------     -----------
Operating Expenses

Operating departments                              167,619         382,270         420,865         966,285
General and administrative                         785,998          38,294       1,849,209         404,604
Depreciation and amortization                      299,580         357,648         670,266         739,680
                                                 -----------     -----------   -----------     -----------
Total operating expense                          1,253,197         778,212       2,940,340       2,110,569
                                                 -----------     -----------   -----------     -----------

Income from Operations                            (830,557)        318,911      (1,750,472)      1,648,249
                                                 -----------     -----------   -----------     -----------
Other Income and Expenses

Interest income                                        564             (51)         13,855          62,603

Other income/gains                                     281          45,547             444          10,578

Other expenses/losses                                   --         (48,253)             --         (43,176)
                                                 -----------     -----------   -----------     -----------
                                                       845          (2,757)         14,299          30,005
                                                 -----------     -----------   -----------     -----------


Income before income tax                          (829,712)        316,154      (1,736,173)      1,678,254

Provision for income tax                           (16,637)       (127,170)        (46,307)       (534,228)
                                                 -----------     -----------   -----------     -----------
Net Income (Loss)                                 (846,349)        188,984      (1,782,480)      1,144,026
                                                 -----------     -----------   -----------     -----------

Other Comprehensive Income
Unrealized gain (loss) on
Foreign Currency Translation, net of tax - Note      1,059         661,879          (6,523)        715,570
                                                 -----------     -----------   -----------     -----------

Total Comprehensive Income                        (845,290)      $ 850,862     $(1,789,003)    $ 1,859,596
                                                 -----------     -----------   -----------     -----------

Basic Earnings Per Share                         $   (0.02)      $    0.01     $     (0.04)    $      0.03

Diluted Earnings Per Share                       $   (0.02)      $    0.01     $     (0.04)    $      0.03

Weighted Average Shares Outstanding             46,775,536      42,863,736       45,048,245     42,900,000
                                                 -----------     -----------   -----------     -----------
</TABLE>


                      (Unaudited -- See Accompanying Notes)


                                       2
<PAGE>


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



<TABLE>
                                                                                        For the Nine Months
                                                                                        Ended September 30,
                                                                                       2006              2005
                                                                                ----------------------------------
<S>                                                                              <C>                 <C>
Cash Flows from Operating Activities
     Net Income                                                                  $ (1,782,480)       $  1,144,026
     Adjustments to reconcile net income to cash flows
     from operating activities
       Depreciation                                                                   669,918             739,714
        Prepaid expense via stock issuance                                            345,000
        (Increase)/Decrease in account balances of:
        Accounts receivable                                                           (85,373)            (33,296)
        Other receivable                                                                   --            (113,851)
        Inventory                                                                     (15,413)             (5,406)
        Prepaid expense & other current assets                                       (126,230)            564,108
        Other Assets                                                                       --              70,081
        Deferred tax asset                                                             60,854                  --
        Accounts payable                                                              163,970             (95,610)
        Customer Deposit                                                              100,000                  --
        Deferred tax liability                                                             --             125,924
        Accrued expenses and other payables                                             2,127            (157,038)
        Foreign Taxes Payable                                                         (61,995)                 --
                                                                                ----------------------------------
Cash Flows from Operating Activities                                                 (729,622)          2,238,652
                                                                                ----------------------------------

Cash Flows from Investing Activities
        Purchase of properties and equipments                                        (256,094)           (486,073)
        Cash paid for construction in progress                                     (1,090,888)                 --
        Acquisition of intangible licensing rights                                   (500,000)

                                                                                ----------------------------------
Cash Flows from Investing Activities                                               (1,846,982)           (486,073)
                                                                                ----------------------------------

Cash Flows from Financing Activities
        Cash proceeds from shareholder loans                                         (138,473)            (47,989)
        Cash lent to affiliate company                                                  3,144                  --
        Cash paid for dividend                                                             --          (2,753,086)
        Proceeds from issuance of common stock-Kubuk Investment                                         1,022,041
        Proceeds from issuance of common stock-Kubuk Gaming                                                 6,144
        Cash proceeds from subscribed capital                                       1,817,149                  --

                                                                                ----------------------------------
Cash Flows from Financing Activities                                                1,681,820          (1,772,890)
                                                                                ----------------------------------

        Other comprehensive income from current year                                   (6,523)            715,570

                                                                                ----------------------------------
Net Change in cash and cash equivalents                                              (901,307)            695,259
                                                                                ----------------------------------
        Cash and cash equivalents at the beginning of year                          1,435,683           1,425,999
                                                                                ----------------------------------
        Cash and cash equivalents at the end of period                            $   534,376        $  2,121,258
                                                                                ==================================

       Cash balance appropriated for owners of Bruce Grupo
       Diversion SAC and Excluded from Cash at the End of Period                           --        $ (1,038,680)

                                                                                ----------------------------------
        Cash and cash equivalents at the end of period                                534,376           1,082,578
                                                                                ==================================

Supplemental Disclosure Information:
        Sale of properties, plant and equipment by Bruce Grupo
        Division SAC to Kubuk Investment SAC 15,453,708
        Non-cash issuance of stock compensation                                   $  1,380,000         15,453,708
                                                                                ----------------------------------
        Cash paid during the period for interest                                            --                 --
                                                                                ----------------------------------
        Cash paid during the period for income taxes                              $    212,465       $    534,228
                                                                           -------------------- --------------------
</TABLE>


                      (Unaudited -- See Accompanying Notes)


                                       3

<PAGE>


                           CHILCO RIVER HOLDINGS, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                    Unaudited


Preliminary Note

The accompanying  condensed consolidated financial statements have been prepared
without  audit,  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Certain information and disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of the management, the
accompanying interim financial statements contain all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation have been included.
The results of operations for the three and nine-month  periods ended  September
30, 2006, are not necessarily  indicative of the results for a full-year period.
It is suggested that these condensed financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's annual
audited financial statements for the year ended December 31, 2005.

1.   Business Organization and Reorganization

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

     Bruce Grupo  Diversion SAC (BGD) was formed on March 1, 1996 and registered
     at the Registry  for Legal  Persons of Lima,  Peru on April 28,  1996.  BGD
     owned a fourteen-story  building and a seven-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,
     discotheques,  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) of Regulation S-X, this
     transaction   was   treated   as   a   business   acquisition   since   the
     revenue-producing  activity  remained  generally  the  same as  before  the
     transaction.   Specifically,   KISAC  retained  the   following:   physical
     facilities,  employee base,  customer  base,  operating  rights,  operation
     techniques, and trade name.

     The gaming  floor of Bruce  Hotel/Casino  has been  temporarily  closed for
     renovation  since March  2005.  During the  renovation,  BGD  continued  to
     operate slot machines in the casino until July 1, 2005, when MINCETUR,  the
     gaming authority of Peru, issued gaming licenses to KGSAC.  KGSAC then took
     over the slot machine  operations and conducts all other gaming  activities
     of Bruce  Hotel/Casino  until  the  renovation  project  is  completed.  In
     anticipation of the start of the planned renovation,  the Company suspended
     the slot room  operation and closed the restaurant to the general public in
     November  2005. As of December 31, 2005,  the Company  carried out only the
     hotel lodging operations.


                                       4

<PAGE>


                           CHILCO RIVER HOLDINGS, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                    Unaudited



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

     On July 15, 2005, CRH entered into a Share Exchange  Agreement with KII and
     certain  representatives of its shareholders.  Under the terms of the Share
     Exchange Agreement, CRH agreed to acquire all of the issued and outstanding
     capital  stock of KII from  KII's  shareholders.  On  August 3,  2005,  CRH
     completed the  acquisition of KII in accordance with the terms of the Share
     Exchange Agreement by issuing 19,250,000 Exchange Shares to shareholders of
     KII as consideration.  KII had 51,000,400 shares of common stock issued and
     outstanding  at  the  time  of  acquisition.   Its  shareholders   received
     0.3749970588  Exchange  Shares for each share of KII common stock tendered.
     In  connection  with  the  closing  of the  Share  Exchange,  the  founding
     shareholder  and  two  former  officers  and  directors  of CRH  agreed  to
     contribute an aggregate of 3,964,000  shares of the CRH common stock to the
     Company as an additional  capital  contribution.  The shares were cancelled
     effective as of August 3, 2005.  See Note 6 for  information  regarding the
     related escrow agreements and share contribution agreement.

     The Company established a software development center in Shenzhen, China in
     April 2006 for the  purposes of  developing  an online  poker  software and
     other devices related to online gaming activities.  The Company intends to,
     after  successful  software  development  and  testing,  license the online
     gaming  software to third  parties  qualified  to conduct  licensed  online
     gaming  activities  outside of the  United  States in  jurisdictions  where
     on-line gaming is legal. The Company has applied to the local government in
     China  for the  foreign  business  branch  office  status  for its  Chinese
     software development center.

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

2.   Significant Accounting Policies

     (a)  Principles of Consolidation

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

     (b)  Use of Estimates

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

     (c)  Cash and Cash Equivalents

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

     (d)  Accounts Receivable

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



                                       5
<PAGE>


                           CHILCO RIVER HOLDINGS, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                    Unaudited


     (e)  Revenue Recognition and Promotional Allowances

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

     In accordance with industry  practice,  the retail value of accommodations,
     food and beverage, and other services furnished to guests without charge is
     included in gross  revenue and then  deducted  as  promotional  allowances.
     There was no promotional  allowance for the nine months ended September 30,
     2006 as all casino and slot machine  operations are  temporarily  suspended
     for renovation.

     (f)  Income Taxes

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

     (g)  Basic and Diluted Earnings per Share

     Basic  earnings per share of common stock were computed by dividing  income
     available to common stockholders,  by the weighted average number of common
     shares outstanding,  net of common stock held in the treasury for the year.
     Diluted  earnings per share were computed using the "treasury stock method"
     under SFAS No. 128 "Earnings per Share."

     (h)  Inventories

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

     (i)  Property, Plant and Equipment

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

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

     (j)  Concentration of Credit Risk

     The Company maintains  substantially  all of its day-to-day  operating cash
     balances with Peruvian  commercial  banks and a California  bank.  Deposits
     with  the  California  bank  are  insured  by  Federal  Deposit   Insurance
     Corporation  (FDIC) up to $100,000.  As of September 30, 2006,  the Company
     had an exposure in the amount of $332,232 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.



                                       6
<PAGE>

                           CHILCO RIVER HOLDINGS, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                    Unaudited


     (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 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
     capitalization   under  $100  million  be  exempted  totally.   It  further
     recommended  that companies with market  capitalization  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. The Commissioner of the SEC has rejected the recommended exemption
     proposed by the advisory committee.

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

     (m)  Reclassifications

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

     (n)  Value Added Tax Recoverable

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


                                       7

<PAGE>

                           CHILCO RIVER HOLDINGS, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                    Unaudited



     (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
     3.3428 and 3.3782:1 on September 30, 2006 and 2005, respectively, while the
     results of operations are translated into US Dollars  equivalents using the
     weighted average exchange rates for each nine-month period presented.

4.   Related Party Transactions

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

     The Company incurred over $33,594 of cash  expenditures,  including amounts
     capitalized as computer  equipments and office  furniture,  at its software
     development center in Shenzhen, China during the third quarter of 2006. All
     of these  third  quarter  Shenzhen  expenditures  have been  advanced  by a
     director  of the  Company.  No  interest  has been  accrued  for the amount
     advanced. The Company has paid back the amount advanced by the director, as
     well as $21,867 that was advanced by the same Director in the quarter ended
     June 30, 2006, in October 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 $0.75 per Unit under the terms of a
     Unit Purchase Agreement.  Each Unit consisted of one share of common stock,
     and a Class A Warrant  exercisable at $1.00 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  4,000,000
     shares of common stock at $0.75 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 2,731,334
     Units as a result of the  private  placement  and  raised  aggregate  gross
     proceeds in the amount of $2,048,500. 2,731,334 shares of common stock were
     issued on February 14, 2006 by the Company.

     On July 5, 2006, the Company's board of directors authorized and approved a
     2 for 1 forward stock split of its issued and outstanding  shares of common
     stock,  par value $0.001 per share, by way of share  dividend.  Immediately
     prior to the stock  dividend,  the Company had 21,840,667  shares of common
     stock issued and  outstanding.  After giving effect to the stock  dividend,
     the Company had 43,681,334 shares of common stock issued and outstanding.

     As of July 13, 2006 the Company has  completed an offer and sale of 666,666
     units,  at a price of $0.75 dollar per unit,  each unit  consisting  of one
     share  of   post-split   common   stock,   par   value   $0.001,   and  one
     non-transferable  share  purchase  warrant which  entitles the purchaser to
     subscribe for one  additional  post-split  common share at a price of $0.75
     dollar  per share by the first  anniversary  of the date of  issuance.  The
     Company  intends to raise  additional  financing  on  similar  terms or may
     pursue other debt or equity financing.



                                       8
<PAGE>

                           CHILCO RIVER HOLDINGS, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                    Unaudited


6.   Cancellation of Shares

     During the third  quarter of the year ended  December 31, 2005, we issued a
     notice of  default  under the terms of the Escrow  Agreement  related to an
     aggregate  of  4,000,000  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 4,000,000 shares were tendered to our
     transfer  agent for  cancellation  and  cancelled  during the quarter ended
     March 31, 2006.

7.   Licensing Rights

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

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

     The Company  recorded the value of licensing  rights acquired as intangible
     assets  under  SFAS No.  142,  Goodwill  and  OtherIntangible  Assets.  The
     majority   portion  of  licensing   rights  acquired  are  not  subject  to
     amortization.  However,  10% of the total value of the licensing  rights is
     identified as service  contract that is amortizable over the 2-year term of
     the license  agreement.  Total  valuation  of the rights  acquired  from KC
     Technology is determined to be $9,262,100,  which includes (1) the $500,000
     payment made on July 15, 2006;  (2) the fair market value of the  3,000,000
     shares issued to KC Technology  on the  Effective  Date,  using the closing
     price  quoted at $1.27  per  share;  (3)  discounted  present  value of the
     Installment  Payments with imputed  interest rate at 12$ per annum; and (4)
     fair value of the Installment Shares, calculated based on the present value
     of estimated share prices at the future issuance dates. The estimated share
     prices at the issuance dates are assumed to be same as $1.27 per share. The
     present value of the share prices are also discounted with imputed interest
     rate of 12%  per  annum.  Total  discount,  which  will  be  amortized  and
     recognized  as  interest  expense  at  the  future  payment  dates,  on the
     Installment Payments as of September 30, 2006 was $267,447.

8.   Subsequent Events

     On August 23,  2006,  the Company  received  $500,000  for the  issuance of
     500,000 shares of common stock  pursuant to an exercise of warrants  issued
     in conjunction with the December 17, 2005 Unit Purchase Agreement.



                                       9
<PAGE>


Item 2.    Plan of Operation.

     All  statements  other than  statements  of  historical  or  current  facts
included in this  report on Form 10-QSB or  incorporated  by  reference  herein,
including,  without  limitation,   statements  regarding  our  future  financial
position,  business strategy,  budgets, projected costs and plans and objectives
of  management   for  future   operations,   are   forward-looking   statements.
Forward-looking   statements   generally   can  be  identified  by  the  use  of
forward-looking   terminology  such  as  "may",  "will",   "expect",   "intend",
"estimate",  "anticipate",  "believe" or "continue"  or the negative  thereof or
variations  thereon or similar  terminology.  These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual results
and  performance  to  be  materially   different  from  any  future  results  or
performance  expressed  or implied by these  forward-looking  statements.  These
factors  include,  those discussed under the caption "Risk Factors"  attached as
Exhibit 99.1 to the  Company's  SB-2/A  Registration  Statement,  filed with the
Securities and Exchange  Commission on May 19, 2006, and incorporated  herein by
reference, as well as the following:

     o    the impact of general economic conditions in the Peru;

     o    industry conditions, including competition;

     o    business strategies and intended results;

     o    our  ability  to  integrate   acquisitions  into  our  operations  and
          management;

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

     o    risks  associated  with the hotel  industry and real estate markets in
          general;

     o    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;

     o    travelers' fears of exposure to contagious diseases;

     o    legislative or regulatory requirements;

     o    access to capital markets; and

     o    other factors beyond our control.

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

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


OVERVIEW

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

     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.  Since that time, we have intended to raise capital to fund the expansion,
renovation and modernization of the Bruce Hotel and Casino.



                                       10
<PAGE>


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

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

     In July 2006, we acquired the exclusive  world-wide  license to manufacture
slot machines based on technology  developed by K.C.  Technology.  We are in the
process  of  marketing  these slot  machines  to  operators  of casinos in South
America.  We intend to raise capital to  manufacture  machines  beginning in the
fourth quarter of 2006 or early 2007. As of September 30, 2006, we have received
slot  machine  profit-sharing  contracts  from a number of Peruvian  slot parlor
operators  for the lease of more  than 300 new slot  machines.  These  contracts
allow us to share the net  earnings  of the slot  machines  that we lease out in
50%-50%  or 60%-40%  ratio.  Because  of lack of  funding  to mass  produce  the
machines,  we have only  delivered 22 units of new slot machine to these leasing
customers  as of September  30, 2006.  We do not expect to generate any material
revenue from our slot machine  business until we successfully  raise  additional
capital.

     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,  we  abandoned  the PEG Claim by giving  notice to the
property  owner to terminate  the  agreement  in August  2005.  We are no longer
engaged  in the  mineral  exploration  business.  We no longer  own any  mineral
exploration properties.


EXPLANATORY NOTE ON FINANCIAL STATEMENTS

     The condensed  consolidated financial statements included in this quarterly
report on Form 10-QSB have been prepared  without  audit,  pursuant to the rules
and regulations of the 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 September 30, 2006, and our results
of  operations  and cash flows for the quarter  ended  September  30, 2006.  The
results of operations for the three- and nine-month  periods ended September 30,
2006 are not necessarily indicative of the results for a full-year period. It is
suggested that these condensed financial  statements be read in conjunction with
the  financial  statements  and notes thereto  included in the Company's  Annual
Audit for the year ended December 31, 2005.

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

     Due to the Agreement and the significance of the Company's operations,  the
"development  stage"  status of Chilco is no longer in effect.  The  development
stage  disclosures  are no longer  required  in the  Company's  current  status.
Historical  results of  operations  for Chilco River  Holdings,  Inc. may differ
materially from future results.



                                       11
<PAGE>

PLAN OF OPERATION

HOSPITALITY BUSINESS

     We intend to continue the operations of the Bruce Hotel and Casino over the
next twelve  months and  beyond.  The Bruce Hotel and Casino is located at Jiron
Francisco  Bolognesi  #  171-191  in  the  Miraflores  District,   Province  and
Department of Lima,  approximately  30 minutes from Jorge Charvez  International
Airport  in  the  heart  of  Miraflores.   The  Bruce  Hotel  and  Casino  is  a
"destination"  hotel and casino location for visitors  traveling to the Republic
of Peru,  including  tourists  from the  People's  Republic  of China.  Prior to
closing,  the casino and slot room were also  popular  with local  residents  in
Peru.

     The  Bruce  Hotel & Casino  is a full  service  hospitality  facility  with
standard and premium lodging accommodations (rooms and suites). In addition, the
hotel is expected to encompass  several  dining  facilities  and a full featured
Gambling Casino with traditional gaming tables and slot machines.


     HOTEL

     The Bruce  Hotel & Casino is a 60 room full  service  hospitality  facility
with  standard  and  premium  lodging  accommodations  (rooms and  suites).  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,  prior to
closing  for  renovations,  the  hotel  offered 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.  Prior
to closing for renovations, our casino and restaurants attracted 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 nine months of 2006:

                      Hotel Average Occupancy Rate

      Month                          2005                      2006
      --------------------------------------------------------------
      January                       52.37 %                  64.88 %
      February                      78.75 %                  68.31 %
      March                         77.19 %                  70.85 %
      April                         69.57 %                  65.10 %
      May                           63.11 %                  71.51 %
      June                          83.68 %                  68.85 %
      July                          76.02 %                  74.26 %
      August                        67.27 %                  69.21 %
      September                     67.34 %                  65.33 %
      October                       71.46 %
      November                      65.93 %
      December                      82.67 %


     RESTAURANTS

     Prior to closing for  renovations,  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 to the public for renovation
in November 2005, but continue to serve meals to hotel guests.



                                       12
<PAGE>


     GAMING CASINO

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

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

     The gaming casino is expected to operate 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 first half of
2007, assuming adequate financing is available.

     SLOT ROOM

     The slot room was closed for renovation in November 2005. The slot room was
located on the first floor of the Hotel next to the lobby.  Once renovations are
complete, the slot room is expected to feature 300 slot machines and accommodate
approximately  350 guests. As of September 30, 2006, we have leased out over 130
slot  machines  that are  retired  from the slot room to other local slot parlor
operators under various lease terms and profit-sharing  agreements. We expect to
lease  out the  remaining  old  slot  machines  in the next  few  months.  These
operating leases vary in terms and average $10 per machine per day in net rental
income.  We believe the slot  machine  rental  income  should  continue at least
through the end of year 2007.

     REAL PROPERTY

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

     The renovation of our casino,  slot room and restaurants are expected to be
completed in first half of 2007,  assuming financing is available.  We expect to
raise approximately $3.5 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:

<TABLE>
                            3rd Qtr 2006      2nd Qtr 2006    1st Qtr 2006    Year 2005     Year 2004
                            -------------------------------------------------------------------------
<S>                            <C>                <C>              <C>            <C>           <C>
     Casino/Leasing            27 %               28 %             16 %           58 %          82 %
     Rooms                     67 %               66 %             77 %           25 %           9 %
     Food & Beverage            5 %                6 %              7 %           11 %           5 %
     Other                      0 %                0 %              0 %            6 %           4 %
     Total                    100 %              100 %            100 %          100 %         100 %
</TABLE>


GAMING DEVICES AND SOFTWARE

     In July, 2006, we entered into an exclusive world-wide license agreement to
license technology to manufacture slot machines developed by K.C. Technology,  a
Hong Kong  corporation.  We issued K.C.  Technology  3,000,000  shares of common
stock and paid an initial licensing fee of $500,000 in July 2006. We also agreed
to pay K.C.  Technology  an  additional  $2 million  in four equal  installments
payable  every  six  months  beginning  January  31,  2007,  and to  issue  K.C.
Technology  3,000,000  additional  shares of common stock in two 1,500,000 share
installments on the first and second anniversary.  We intend to raise capital to
manufacture  and sell,  lease or  profit-share  slot  machines  beginning in the
fourth  quarter of 2006 or early  2007.  We raised  $500,000  to pay the initial
license fee by issuing  666,666 units at $0.75 per unit in July 2006.  Each unit
consisted  of  one  share  of  common  stock  and  one  share  purchase  warrant
exercisable  to  acquire  one share of  common  stock at $0.75 per share for one
year.  We  anticipate  that it will require at least $2.2 million to fulfill the
production of 400 slot machines immediately.

     The  Company  had  produced  22  "Kubuk"  brand slot  machines  with the KC
technology  and  exhibited  these new Kubuk slot  machines in a gaming  industry
trade show in Lima,  Peru on August 3, 2006.  As a result of the  exhibition  of
these Kubuk slot  machines  in the trade show,  we have  received  slot  machine
profit-sharing  contracts  from nine Peruvian slot parlor  operators for 300 new
slot machines.  These  contracts  allow us to share the net earnings of the slot
machines that we lease out in 50%-50% or 60%-40% ratio. Because of



                                       13
<PAGE>



lack of funding to mass produce the  machines,  we have only  delivered 22 Kubuk
slot machines to these leasing customers as of September 30, 2006.

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


SATISFACTION OF CASH OBLIGATIONS FOR THE NEXT TWELVE MONTHS.

     Aside from the cash requirements for the Bruce Casino renovation  projects,
we  believe  that the cash flow  from our  hotel and the  rental of the old slot
machines will not be sufficient to meet our minimum  operating cash requirements
to continue as a going  concern for the next twelve  months.  We intend to use a
combination of available cash and additional  financing to meet obligations over
the next  twelve  months,  including  the cost of  renovation  of the casino and
restaurant at an estimated  amount of  $3,500,000.  As of September 30, 2006, we
raised approximately  $3,000,000, we 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 and $500,000 as the initial payment to KC Technology  under
a license agreement.  We intend to secure additional  financing in the amount of
$7,700,000  in one or more  transactions  as soon as  practicable.  The required
financing includes funding for (1) Casino and hotel renovation in total budgeted
amount of  $3,500,000;  (2) voluntary and statutory cash reserves for the casino
in the  amount  of  $1,500,000,  (3)  the  $500,000  installment  payable  to KC
Technology by January 31, 2007;  and (4) $2,200,000 to pay for the production of
approximately 400 new Kubuk Slot Machines.

     These financing transactions may involve collateralized  borrowing,  equity
securities  offerings,  or a combination  of both. We intend to use the proceeds
from these transactions,  if any, to expand,  renovate and modernize the current
facilities  of the Bruce  Hotel and Casino and to  capitalize  our slot  machine
business. We expect to fund the remaining cash requirement of the renovation and
acquisition of new equipment through additional capital infusions, including the
proceeds  from  the  exercise  of the  Class  A  warrants,  if any,  and  future
offerings.  If we are unable to raise the funds to complete the  renovations  in
debt or equity  transactions,  we intend to fund  completion of the  renovations
through cash flow from operations and reopen the casino in stages.  We currently
have no firm commitments with respect to additional financing, and cannot assure
you that such financing will be available.

     We received  $500,000  during the  quarter  ended  September  30, 2006 as a
result of exercise of 500,000 warrants in December, 2005.


     SUMMARY OF ANY PRODUCT  RESEARCH AND  DEVELOPMENT  THAT WE WILL PERFORM FOR
     THE TERM OF THE PLAN.

     EXPECTED PURCHASE OR SALE OF PLANT AND SIGNIFICANT EQUIPMENT.

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


          Slot Machines                                       $1,400,000
          Other casino equipment                              $1,080,000
          Building improvements and furniture                 $  800,000
          Restaurant and lounge                               $  220,000
                                                             -----------
          Total                                               $3,500,000


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

     We acquired exclusive rights to manufacture and sell  cost-competitive slot
machines.  We intend to manufacture  and distribute the slot machines in central
and south American markets beginning in early 2007,  assuming adequate financing
is  available.  We do not plan to establish  our own  manufacturing  facility to
produce Kubuk gaming machines.  Instead,  we plan to contract our  manufacturing
with a  third-party  manufacturer.  We  anticipate we will require at least $2.2
million  additional  financing  for our slot  machines  business  in the next 12
months.


SIGNIFICANT CHANGES IN NUMBER OF EMPLOYEES.

     As of September 30, 2006, we had approximately 50 employees.  We anticipate
that we will  hire  approximately  50 to 70  employees  prior to  reopening  our
casino,  slot  room and  restaurant  in 2007,  assuming  adequate  financing  is
available.



                                       14
<PAGE>



RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND
2005.

     The Company had revenues of $422,640  ($1,097,123  - 2005) during the three
months ended September 30, 2006, and revenues of $1,189,868  ($3,758,818 - 2005)
during the nine months ended September 30, 2006.  Overall revenues were down 61%
for the three-month  comparative periods and 68% for the nine-month periods. The
lower  revenues  during the periods in 2006 compared to 2005 are a direct result
of the closure of the Company's casino floor for renovation in February 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  September 30, 2006 were
$1,253,197  ($778,212 - 2005),  and  $2,940,340  ($2,110,569  - 2005) during the
nine-month  period ended September 30, 2006.  Despite  substantial  reduction in
labor and other  variable  costs  associated  with the closure of the casino and
slot room since  2005,  operating  expenses  for the first  nine  months of 2006
compared to 2005  increased  by $713,995 due to  increased  marketing  expenses,
legal and  accounting  costs and $345,000  amortization  of  consulting  service
expense,  prepaid  by  issuance  of our stock to a service  provider  during the
second quarter of 2006. We had no legal and other SEC reporting related costs in
the first nine months of 2005 at Kubuk, or its predecessor Bruce Grupo Diversion
SAC. We paid over $800,000 of expenses,  which are  non-recurring in nature,  in
cash to various  marketing and public  relation firms.  Consequently,  loss from
operation for the  three-month  period ended  September 30, 2006 was $(830,557),
compared to income from  operation in the amount of $318,911 for the same period
in 2005.  Income  (loss)  from  operation  as a  percentage  of revenue  for the
three-month  periods  ended  September  30,  2006 and 2005 was  (197)%  and 29%,
respectively,  while  the same  percentages  for the  nine-month  periods  ended
September 30, 2006 and 2005 were (139)% and 44%. Our net loss from operation for
the nine-month  period ended  September 30, 2006 was  $(1,750,472),  compared to
income from  operation in the amount of $1,648,249  for the same period in 2005.
The lower income from operation  during the period in 2006 compared to 2005, was
a direct  result of the closure of the  Company's  casino floor and slot room in
2005 for renovation and the increased public company  compliance costs following
the reverse merger transaction in July 2005.

     Net loss,  after other income and expenses and  provision for income taxes,
was $(846,349) (a net loss of $0.02 per share) for the three-month  period ended
September 30, 2006, compared to net income of $188,984 ($0.01 per share) for the
three months ended  September 30, 2005. The Company paid income taxes of $16,637
and $127,170 for the  three-month  periods  ended  September  30, 2006 and 2005,
respectively.

     Net loss,  after other income and expenses and  provision for income taxes,
was $(1,782,480) (a net loss of $0.04 per share) for the nine-month period ended
September 30, 2006,  compared to net income of $1,144,026  ($0.03 per share) for
the nine-month period ended September 30, 2005. The Company paid income taxes of
$46,307 and $534,228 for the  nine-month  periods  ended  September 30, 2006 and
2005, respectively.

     The Company had a gain (loss) on foreign currency translation of $1,059 and
($6,523) during the three-month and nine-month periods ended September 30, 2006,
respectively,  compared to a $661,863 and $715,570  gain during the same periods
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 $3.5
million to renovate and  modernize  the current  facilities of the Bruce Hotel &
Casino.  The Company has no firm  commitments  to raise such capital to complete
such renovations.

     In addition, we entered into a Licensing Agreement with K.C. Technology,  a
Hong Kong corporation, under which the registrant acquired from K.C. a worldwide
exclusive and perpetual license to use K.C.'s technology to manufacture,  market
and distribute K.C. designed slot machines and other gaming products,  including
an  electronic  data  transfer  device  trademarked  Smartbook.  The  technology
includes all technology,  tools, design,  components,  hardware,  software,  and
specification  necessary for the design and  manufacturing  of slot machines and
Smartbook and all associated  patents,  trademarks,  copyrights,  trade secrets,
know-how.  We agreed to pay K.C. a cash  license  fee of  $2,500,000,  of which,
$500,000  was paid in July  2006,  and the  balance  will be paid in four  equal
installments  of  $500,000  each at the end of January  and June,  respectively,
during  the next two years.  We also  agreed to pay  Licensor a licensee  fee in
common stock of 6,000,000  shares of restricted  common stock, par value $0.001,
of which 3,000,000 share were issued in July 2006, 1,500,000 to be issued on the
first  anniversary of the date of the effective date, and 1,500,000 to be issued
on the second  anniversary of the effective  date. We granted K.C.  registration
rights  and  undertook  to  use  commercially   reasonable   effort  to  file  a
registration  statement with the United States  Securities  Commission within 90
days of the  Effective  Date to register for resale the first  3,000,000  shares
common stock issued to K.C.  under the License  Agreement.  We intend to market,
sell, lease or profit-share  slot machines  beginning in the first half of 2007.
The cash  payments  and the fair market  value of the shares  issued  under this
licensing  agreement are  capitalized on our balance sheet as intangible  assets
and are determined to have infinite useful lives.  These capitalized  intangible
licensing rights are not amortized and are tested at least annually to determine
whether  impairment  of value has occurred by the end of each fiscal year. If it
is determined that the carrying value of these intangibles has been impaired,  a
loss will be recognized to the extent of the excess of such carrying  value over
the fair  value of these  intangibles.  No  impairment  loss is  recorded  as of
September 30, 2006.



                                       15
<PAGE>


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


LIQUIDITY AND CAPITAL RESOURCES

     The Company is in the process of completing a  comprehensive  renovation of
the Bruce Hotel & Casino and will  require  additional  capital to complete  the
remodel of the casino and resume operations of the casino floor.

     The Company intends to market,  sell,  lease or profit-share  slot machines
beginning in the first  quarter of 2007.  The Company  anticipates  that it will
need to raise at least $2.2  million in  additional  capital to fund our plan of
operation related to our slot machine business. The Company also has commitments
to make payments of $500,000 each January and June to K.C.  Technology under the
terms of the License Agreement.  If the Company fails to make such payments, the
Company will default under the terms of the License Agreement and could lose the
license.  We cannot assure you that we will successfully raise such financing on
acceptable  terms,  if at all, or that we will be  successful  in marketing  and
selling  our  slot  machines.  The  Company  has no firm  commitments  for  such
financing.

     Cash flow from operations  during the nine months ended September 30, 2006,
were  significantly  lower than cash flow from operations during the same period
in 2005.  The  Company's  revenues  during the periods  after the closure of the
Company's slot room and restaurant in November 2005 was principally derived from
hotel and rental of old slot  machines.  The Company  does not  anticipate  that
revenues  will return to  historical  levels until the  renovation of its casino
floor  is  completed.  The  Company  has  several  fixed  costs  related  to its
operations,  which  resulted in higher  operating  expenses and lower  operating
revenue as a percentage  of sales.  The Company  anticipates  that its cash flow
from  operations  will remain at  approximately  the same level until its casino
floor is fully  operational,  except that certain  non-recurring  cash expenses,
including a special  marketing  expense in the amount of $800,000 to promote the
public  awareness of the Company and its business in 2006,  will not be incurred
in the future periods.

     As of September  30, 2006,  the Company had current  assets of  $1,103,911,
including  cash and cash  equivalents  of $534,376,  and current  liabilities of
$1,309,174,  excluding  installment  obligations  in the  amount  of  $1,700,893
payable in the  Company's  common  stock to KC  Technology.  The  Company  had a
working  capital  deficit  of  $205,263.  We have  commitments  and  contractual
obligations  for the Company during the next 12 months of  $1,000,000,  which is
attributable to the KC Technology  License  Agreement.  The Company did not have
any long-term debt as of September 30, 2006, except for installment  obligations
payable to KC Technology in the Company's common stock.

     For the first nine months of 2006, our operation in Peru generates  roughly
$652,000 of positive cash flow.  During the same period,  our U.S.  headquarters
operation  consumed roughly  $1,557,000 in cash expenses,  including an $800,000
special  marketing  expense  mandated  under the December 17, 2005 Unit Purchase
Agreement. We do not anticipate to incurring such expense in the future periods.

     To address this ongoing  concern,  we continue to seek  additional  funding
both from private equity and other alternative resources. In July 2006 we raised
an  additional  $500,000,  through a second Unit Purchase  Agreement.  In August
2006,  we received  $500,000 for the issuance of 500,000 shares of common stock
pursuant to an exercise of class A warrants.

     We currently have no alternative sources of funding,  and we currently rely
on cash  flow from our hotel  and the  rental of old slot  machines  to meet our
working  capital  requirements.  Our current plan is to reopen our entire gaming
and  restaurant  operations  once  we  have  completed  all of the  renovations;
however,  if funds are not available to complete all of the 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 the Company. Subsequently, the entire balance of $61,317,
which  accounts for the principal and interest was paid off on July 19, 2006. We
are also  indebted  to one of our  Directors  for cash  advanced  to pay for the
expenses in our  Shenzhen  software  development  center.  The unpaid  borrowing
amounted to $55,558 as of September 30, 2006.

     We  anticipate  that it will  require  $3.5  million to renovate our casino
floor and to  purchase  gaming  equipment.  We  estimate  the costs to  complete
renovation of our restaurant and lounge will be  approximately  $220,000.  We do
not have sufficient  cash flow and working capital to complete our  renovations.
We will not start  renovating  the  restaurant  and creating the new lounge area
until the renovation of slot room is completed or until  sufficient  funding for
all renovation projects is secured.

     Historically,  in 2004,  casino and slot machine revenue  accounted for 82%
(approximately  $8.75  million)  of out  total  revenue.  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.



                                       16
<PAGE>


     We  anticipate  that we will be able  to  complete  the  renovation  of our
casino,  slot room,  and  restaurant in the first half of 2007,  assuming we are
able to raise  adequate  financing  prior to the end of 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.

     Our financial statements have been prepared based on the assumption that we
will be able to  continue  as a going  concern.  If we fail to raise  additional
capital in the next six months, we may be unable to continue as a going concern.


OFF-BALANCE SHEET ARRANGEMENTS

     The Company had no off-balance sheet transactions.


SUBSEQUENT EVENTS

EXERCISE OF WARRANTS

     In August 2006, the Company  received  $500,000 for the issuance of 500,000
shares of common stock pursuant to an exercise of class A warrants.


ITEM 3.  CONTROLS AND PROCEDURES

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

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

     During the most recent fiscal quarter ended  September 30, 2006,  there has
been no change in our internal  control over financial  reporting (as defined in
Rule  13a-15(f)  or  15d-15(f)  under  the  Exchange  Act)  that has  materially
affected,  or is reasonably  likely to materially  affect,  our internal control
over financial reporting.



                                       17
<PAGE>


PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     Not applicable.


ITEM 1A. RISK FACTORS

     As of November  15,  2006,  there have been no material  changes  from risk
factors as previously  disclosed in the Company's Form 10-KSB,  filed August 16,
2006.


ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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

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

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

     In August 2006, the Company  received  $500,000 for the issuance of 500,000
shares of common  stock  pursuant  to an  exercise  of class A  warrants  to one
non-U.S.  Person  outside  the  United  States  pursuant  to an  exemption  from
registration  available  under Rule 903 of  Regulation  S of the  United  States
Securities Act of 1933, as amended.  The entire  proceeds  received will be used
toward the renovation of Casino in Peru and as general working capital.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     Not Applicable


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

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


ITEM 5.  OTHER INFORMATION

     None.

ITEM 6.  EXHIBITS

     A) Exhibits

     Number    Description
     ------    -----------

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

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

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

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




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<PAGE>


                                   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: November 14, 2006




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

Date: November 14, 2006





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