UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



|(Mark One) |                                                                                                     
|---------- | ----------------------------------------------------------------------------------------------------
|x          | ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
|           | For the Fiscal Year Ended:  December 31, 2010                                                       
|o          | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934    
|           | OR                                                                                                  
|           | For the transition period from ________ to _________                                                



Commission File Number: 000-50029



CHINA HEALTH RESOURCE, INC.

(Exact name of Registrant as specified in its
Charter)



|Delaware                                                               | 73-1629948                                  
|---------------------------------------------------------------------- | --------------------------------------------
|(State or other jurisdiction of
        incorporation or organization) | (I.R.S. Employer
        Identification No.)



343 Sui Zhou Zhong Road

Suining City, Sichuan Province, P.R. China

(Address of Principal Executive Offices)



+(86-825) 239-1788

(Issuer’s Telephone Number)



Securities registered pursuant to Section 12(b)
of the Act:



|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                | Not Applicable                           



Securities registered pursuant to Section
12(g) of the Act:

Common Stock $.001 par value



Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YesoNox



Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  YesoNox



Indicate by check mark whether
the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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.  YesxNoo



Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.o



1





Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of the “large
accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one):



|Large accelerated filero | Accelerated filero        
|------------------------ | --------------------------
|Non-accelerated filero   | Smaller reporting companyx





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



As of December 31, 2010, there were 159,935,953 shares of the
registrant’s Common Stock, par value $0.001, issued and outstanding, of which approximately 84,419,603 are held by non-affiliates
of the registrant.  The aggregate market value of securities held by non-affiliates is approximately $717,566 as of June
30, 2010, based upon the registrant’s closing bid price as quoted on the OTC Bulletin Board on June 30, 2010, of $0.0085
per share.



Information related to our company, including certain reports filed
with or furnished to the SEC, are available through our website (http://www.chinahealthresource.com).  We are not including
any information on our website as part of, or incorporating it by reference into, our Form 10-K.





2







CHINA HEALTH RESOURCE, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

DECEMBER 31, 2010



TABLE OF CONTENTS





|         |  |                                                                                                               | Page
|-------- |  | ------------------------------------------------------------------------------------------------------------- | ----
|PART I  
|Item 1.  |  | Business                                                                                                      | 5   
|Item 1A. |  | Risk Factors                                                                                                  | 10  
|Item 1B. |  | Unresolved Staff Comments                                                                                     | 10  
|Item 2.  |  | Properties                                                                                                    | 10  
|Item 3.  |  | Legal Proceedings                                                                                             | 11  
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                           | 11  
|PART II 
|Item 5.  |  | Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities | 12  
|Item 6.  |  | Selected Financial Data                                                                                       | 12  
|Item 7.  |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                         | 13  
|Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                                                    | 18  
|Item 8.  |  | Financial Statements and Supplementary Data                                                                   | 18  
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                          | 18  
|Item 9A. |  | Controls and Procedures                                                                                       | 18  
|Item 9B. |  | Other Information                                                                                             | 19  
|PART III
|Item 10. |  | Directors, Executive Officers and Corporate Governance                                                        | 20  
|Item 11. |  | Executive Compensation                                                                                        | 22  
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                | 25  
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                     | 27  
|Item 14. |  | Principal Accounting Fees and Services                                                                        | 27  
|PART IV 
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                    | 28  
|         |  | Signatures                                                                                                    | 29  
|         |  |                                                                                                               |     
|         |  | Exhibit Index                                                                                                 | 30  



Explanatory Notes



In this Annual Report on Form 10-K, China Health Resource, Inc.
is sometimes referred to as the “Company”, “we”, “our” or “China Health Resource, Inc.”
and U.S. Securities and Exchange Commission is sometimes referred to as the “SEC”.









3





CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING
INFORMATION



Except for historical information, this report contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.  Such forward-looking
statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues
and anticipated costs and expenses.  Such forward-looking statements include, among others, those statements including
the words “expect,” “anticipate,” “intend,” “believe” and similar language.  Our
actual results may differ significantly from those projected in the forward-looking statements.  Factors that might cause
or contribute to such differences include, but are not limited to, those discussed in Item 1- Business and Item 7 - Management’s
Discussion and Analysis of Financial Condition and Results of Operations. You are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of this report.  We undertake no obligation to publicly release
any revisions to the forward-looking statements or reflect events or circumstances taking place after the date of this document.



Although we believe that the expectations reflected in these forward-looking
statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to
differ materially from such forward-looking statements.



All references in this Form 10-K to the “Company,” “CHRI,”
the “Registrant,” “we,” “us” or “our” are to China Health Resource, Inc., a Delaware
corporation.  These terms also refer, where context requires, to our subsidiary corporation, Suining Shi Yinfa Bai Zhi
Chan Ye You Xian Gong Si, a corporation organized and existing under the laws of the Peoples’ Republic of China (“Yinfa”),
acquired in August 2006.  All references in this Form 10-K to the “PRC” are to the Peoples’ Republic
of China.



4





PART I



Item 1.    Business



History



We were incorporated in the State of Delaware on February 26, 2002.
In June and July 2002, we acquired approximately 99% of the outstanding shares of Voice Diary Ltd., an Israeli corporation (“VDL”),
through an exchange of shares of the Company with shareholders of VDL. On June 13, 2006, we, as the acquirer, executed a Plan of
Exchange with Yinfa (acquiree), the shareholders of Yinfa and the Company’s then majority shareholders, pursuant to which
we issued 30,000,000 (pre-forward split) new shares of our Class A Common Stock to the Yinfa shareholders in a transaction exempt
from the registration requirements of the Securities Act of 1933, as amended, in reliance upon Regulation S thereunder, in exchange
for all of their shares of registered capital of Yinfa. As a result, Yinfa became our wholly-owned subsidiary. Yinfa was founded
on April 24, 2001, with registered capital of US $125,500 (RMB 1,000,000) and total assets of US $1,475,795.  Yinfa’s
business incorporates a self-owned production base and a network of DAR (as defined below) associates, farmers and research and
development affiliates. The transaction was treated for accounting purposes as a capital transaction and recapitalization by the
accounting acquirer and as a re-organization by the accounting acquiree. We disposed of VDL on August 22, 2006 pursuant to the
agreement between the Company, VDL and Arie Hinkis, our former president. On May 21, 2007, we changed our name to China Health
Resource, Inc. to more accurately reflect our business operations.



Our Business



Since the completion of the Plan
of Exchange with Yinfa, our core business has been in pharmaceuticals and the continued operations of Yinfa. Yinfa is a Chinese
pharmaceutical company focused onproducing, processing, and commercializingDahurian Angelica Root (“DAR”), a popular traditional Chinese medicine (“TCM”) and developing DAR-related
products to pharmaceutical manufacturers and wholesale markets.  DAR is a popular herb employed extensively as an ingredient
in food, medicine and cosmetics for the treatment of pain, swelling and pustule. Suining City in Sichuan Province of China is the
major planting and production area in China for DAR as a result of the unique local climate and soil properties.  As
mandated by the central government, 100% of DAR for pharmaceutical use in China must be produced with GAP standards in Suining
by Yinfa, bearing the “Sichuan Angelica” trademark.



In May 2005, we applied for and obtained Good Agricultural Practice
(“GAP”) certification for DAR, in cooperation with Sichuan Yinfa Resource Development Group Co. Ltd., our affiliate
(“Yinfa Resource”).  The standards which must be met to obtain GAP certification include the study of our
environment quality including water and soil samples, seed quality, use of pesticides, and use of fertilizers.  These
standards were approved by the Chinese State Food and Drug Administration (the “SFDA”).  Our GAP farm production
base includes approximately 133,334 square meters of experimental planting fields, and 1,333,340 square meters of contracted farm
production bases, all of which have passed inspection by the SFDA, on February 26, 2006.  The GAP standards are inspected
annually. The GAP certificate has been issued in name of our partner, Yinfa Resource.  The significance of our exclusive
GAP certification for DAR demonstrates the high quality standards of our DAR and DAR-related products.



In 2007, Yinfa achieved a cooperation with the Sichuan Province
Suining City DAR Association (“Association”) and received the exclusive rights to the “Sichuan Angelica”
certified trademark from the Chinese State Administration of Industry and Commerce through December 13, 2016. As holder of the
rights to the trademark, Yinfa is entitled to receive a management fee of 1RMB (or approximately US $0.14) per kilogram of DAR
(including packaging fees) from any user of the trademark, of which 60% may be used by Yinfa for further development and investment
of its DAR business and the remaining 40% must be paid to the Association for related expenses.  In addition, Yinfa is
entitled to receive 100% of the revenue stream from the use of the DAR trademark through December 13, 2016 and 95% of the revenue
stream thereafter. There are approximately 235 regional certification trademarks in China, including 65 for natural resources,
of which over 20 are for natural herb resources. In addition to the DAR Association, in 2010, Yinfa received the exclusive license
to use and manage the “Sichuan Angelica” trademark by the General Administration of Quality Supervision, Inspection
and Quarantine of People’s Republic of China.



5





Currently, raw-DAR in both its original root form and processed
form (both sliced and powder) is one of Yinfa’s major products, which is sold to pharmaceutical manufacturers or wholesalers.
Our DAR-related products include Yisheng Capsule, Kimchee-Mate and Fragrant Bag, all of which have been certified by the SFDA,
and sold to regional distributors throughout China.



We believe our business model will help facilitate the process of
growing and commercializing DAR, as well as further research and development of DAR and DAR-related products.  We will continue
to explore the development and addition of DAR in a range of foods, medicines and cosmetics. In addition, we continue to consider
and explore opportunities to expand our current asset base and product offerings to increase our revenues and enhance shareholder
value. These opportunities may include, but are not limited to, acquisitions or licensing of additional products through a combination
or merger of Yinfa with other Chinese companies in synergistic or complementary industries.



Our Market Opportunity



We believe that TCM presents a highly attractive opportunity for
the following reasons.



The trend towards organic materials.  Since World
War II, traditional agricultural and organic agriculture, has been subject to extensive application of synthetic chemicals, such
as synthetic fertilizers, pesticides, herbicides, and mass-production techniques. The advocacy of organic agriculture and the trend
for organic materials is recognized globally and is a strong part of the Chinese culture. In addition, TCM represents a vast market
in China and a growing market internationally. Different from modern chemical-intensive medication, TCM consists of various natural
herbs. Naturalism is the essence of traditional Chinese herbal theory and the functions of herbs have been studied and applied
for thousands of years in China.



Substantial markets.  As reported by China Medical
News in 2008, the global trade volume of TCM increased from approximately $140 billion in 2006 to $154 billion in 2007, with the
global export volume increasing from approximately $110 billion to $118 billion in the same period. (China Medical News, Vol. 23,
p.2 Market Journal, 2008).  Additionally, as governments and world bodies, such as the World Health Organization, continue
to accept TCM, the number of potential customers continues to grow, as shown by the increasing trade volume and exports.  We
believe that we are in a position to take advantage of the growing acceptance of TCM through the development of our products.



Acceptance of GAP standards in China.  Even though
Chinese herbal theory has evolved over thousands of years, China did not play a key role historically in the global herbal medication
market.  This was due to a lack of standards with respect to quality control of Chinese medicinal herbs.  This
situation has changed since GAP was adopted by China in 2003. GAP regulates controls at every stage of herb development from the
ecological environment, germplasm and breeding, to cultivating, raising, collecting, transporting, packaging and quantitative administration.
GAP is the first step to implementing good manufacturing practice in the TCM industry because quality control begins with the planting
of herbs.



The raw herb material is formed through different growing and
production stages.  Different germplasm, ecological environment, culture technology, and harvesting times and processing
methods can all influence the output and quality of the herbs. Therefore, without adequate quality control, there can be significant
risks when buying herbs from different sources in the market.  For example, in the open market, herbs in the same genus
but in different species are often confused and mixed together. Only a specific species will have the most active ingredients.



Increasing use in combination with Western medicine.  Social
and demographic factors contribute to the growth in the TCM market and the need for new, natural therapies.  TCM is a
supplement for chemical-intensive treatments, such as chemotherapy, due to its natural features and functions in strengthening
the immune system. In addition to the increased side effects of chemical-intensive treatments, we believe that standard chemical-intensive
treatment regimens have several other limitations, including multiple daily dosage requirements, lengthy treatment periods, limited
effectiveness and severe side effects, all of which may decrease patient compliance and, ultimately, therapeutic efficacy.



6





Our Proprietary GAP-Certified DAR Products



A GAP certificate means that the planting, quality and manufacturing
of DAR meets a high and certifiable standard. We are confident in the quality of, and therefore the market for, our DAR products.
Our process in growing DAR is certified according to GAP. The table below highlights the standards which DAR products must meet
to be GAP-certified.



Ingredients Constituting GAP DAR (State Food and Drug Administration,
“Traditional Chinese Medicine Production Quality Administration Standard,” No. 32 Order.)



|No. | Ingredient                       | GAP DAR                           
|--- | -------------------------------- | ----------------------------------
|1   | Water                            |                                   
|2   | Ash                              |                                   
|3   | Insoluble Acid                   |                                   
|4   | Heavy Metal                      | Lead                              
|    | Cadmium                          | < 0.3mg/kg                        
|    | Mercury                          | < 0.2mg/kg                        
|    | Arsenic                          | < 2.0mg/kg                        
|5   | Pesticide                        | Residue Benzene hexachloride (BHC)
|    | Gesarex                          | < 2%                              
|    | Terrachlor                       | < 1%                              
|6   | Microbes                         | Virus                             
|    | Mucedine                         | < 100 unit/g                      
|    | Colibacillus                     | N/A                               
|7   | Extract                          |                                   
|8   | Imperatorin & Alloisoimperatorin |                                   
|9   | Total Coumarin                   |                                   



As mentioned above, the ecological environment is another important
factor affecting the quality of DAR. The suitable environment for DAR is a warm and moist climate with medium-dry soil. Suining,
where Yinfa is based, is located at the edge of the Sichuan basin, southwest China, covered by the subtropical climate belt. The
annual mean temperature in this region is approximately 63.3°F, and annual rainfall is approximately 39.09 inches. In addition,
the soil in this region contains abundant elements, such as potassium, phosphorus, and others, which is beneficial to the growth
of herbs, such as DAR.



Marketing Strategy



We expect to use our proprietary technology in DAR to develop and
commercialize more efficient, effective and convenient DAR products. To achieve this objective, our business model incorporates
our self-owned production base, DAR associates, farmers and research and development affiliates.  We believe the business
model will facilitate the growing process, research and development, commercializing DAR, sales and marketing. Currently, our DAR-related
products include the Yisheng Capsule, Kimchee-Mate and Fragrant Bag, which have been certified by the SFDA and marketed through
regional distributors throughout China. Yinfa continues to explore the application for DAR in a range of food, medicine and cosmetics.



In addition, we have adopted the following product development and
commercialization strategies:



Commercialize GAP DAR products. We plan to develop high quality
DAR products certified by GAP, which may include DAR seeds to pharmaceutical factories as raw material, or DAR-related products.  Such
DAR-related products may include medicines used for the treatment of tension and cluster headaches, including migraines, along
with other DAR-related products.  We believe that our DAR and DAR-related products will be competitive in the marketplace
due to our GAP certification and their increased efficacy over competing products.



7





Develop sales and marketing functions across multiple DAR products.
We have a long-range plan to build a pharmaceutical company to take advantage of the local resources of DAR and develop and commercialize
DAR and its related products, diversifying our product lines to better compete in the growing TCM market. We believe that Yinfa’s
commercialization strategy will allow us to fully enhance the value of its DAR product and retain significant control over its
development and commercial activities. In order to facilitate the sales channel for DAR, we are considering several sales and marketing
strategies, including strengthening our nation-wide network in China via regional distributors.



We have also entered into agreements with other pharmaceutical companies
which purchase DAR as raw material. For example, we have an exclusive agreement with Chengdu Derentang Pharmaceutical Ltd. (“Derentang”),
the largest Chinese medicine distributor in the Sichuan province, which owns approximately 600 medical franchise stores throughout
China, of which 120 stores are in Sichuan. We are the exclusive supplier of DAR to Derentang in the Sichuan area and our DAR products
are sold in all of Derentang’s medical franchise stores.  This agreement will expire in 2017.



Seek support from local resources. In order to commercialize
TCM products and increase the income for TCM farmers, the local government of Suining City has successfully developed grower networks
for TCM to facilitate the process from fields to end users, including planting, production, distribution and sales.  Additionally,
we intend to take advantage of the vast TCM resources available to aid in the development of our products in Sichuan province,
which contains numerous research institutions and universities that focus on research and development of TCM.





Pursue strategic partners. For certain DAR products, we intend
to enter into collaborative arrangements with third parties in order for us to:



·fund
our research and development activities;



·fund
manufacturing by third parties;



·seek
and obtain regulatory approvals; and



·successfully
commercialize our DAR products.



Pursuant to an exclusive agreement with DongUi Cosmetics Co. (“DongUi”)
in 2007, a Korean corporation, for the development of our DAR market in South Korea. DongUi acts as our sole marketing agent in
South Korea for DAR. DongUi’s initial order was approximately 300 tons of DAR raw material and, under the terms of the agreement,
DongUi is obligated to increase their annual DAR order at a rate of at least 10% per annum. The collaborative agreement will expire
in 2017.





Competition



The TCM industry is highly competitive in many areas. Our DAR and
DAR-related products will compete with other available products based primarily on:



·efficacy

·safety

·tolerability

·acceptance
by doctors

·patient
compliance and acceptance

·patent
protection

·convenience

·price

·insurance
and other reimbursement coverage

·distribution

·marketing

·adaptability
to various models of dosing



8





Competitors include national and regional TCM providers, TCM manufacturers,
wholesalers and chain drug stores.



Many of our competitors possess greater financial, managerial and
technical resources and have established reputations for successfully developing and marketing TCM, all of which put us at a competitive
disadvantage.  Our competitors may be able to apply their resources and capabilities to develop and commercialize products
that have distinct, enhanced, or perceived advantages over our products. In addition, our competitors may be in a position to devote
greater resources in the sales, marketing, and distribution of these products and, therefore, considerably impact our ability to
successfully sell, market and distribute our own products.



Manufacturing



We currently rely on several third-party contract manufacturers
to produce sufficient quantities of DAR-related products. We believe that our initial focus on the application for GAP certification
for DAR will reduce the risk and time involved in the development of manufacturing capabilities because production of DAR-related
products involves well-established and well-accepted manufacturing techniques and processes. We intend to continue to rely upon
third-party contract manufacturers for production of our DAR-related products. The use of third parties for these activities allows
us to minimize our initial capital investment and reduce the risk that would be associated with the establishment of our own commercial
manufacturing and distribution operations.



Chinese Government Regulation



We must follow various government regulations and, in particular,
the SFDA regulations.  Government regulations may have material impact on our operations, increase costs and could prevent
or delay our licensing, manufacturing and selling our products.  Our research, development, testing, manufacturing and
marketing activities are subject to various governmental regulations in China, including health and drug regulations.  Government
regulations, among other things, cover the inspection of and controls over testing, manufacturing, safety and environmental considerations,
efficacy, labeling, advertising, promotion, record keeping and sale and distribution of pharmaceutical products.  We
will not be able to license, manufacture, sell and distribute the vast majority of our products without proper approvals from government
agencies and in particular the SFDA. Each new product must receive proper approvals before licensing, manufacturing, selling, and
distributing, and there is no assurance that we will obtain such approvals each time.



In addition, delays or rejections may be encountered based upon
additional government regulation from future legislation, administrative action or changes in governmental policy and interpretation
during the period of product development and product assessment.  Although we have, so far, obtained the marketing rights
for selling some of our products in China, we may not continue to receive and maintain regulatory approvals for the sales of these
products.  Our marketing activities are also subject to government regulations with respect to the prices that we intend
to charge or any other marketing and promotional related activities.  Government regulations may substantially increase
our costs for developing, licensing, manufacturing and selling products, negatively impacting our operation, revenue, income and
cash flow.



The manufacture and sale of pharmaceutical products in the PRC is
heavily regulated by many state, provincial and local authorities.  These regulations significantly increase the difficulty
and costs involved in obtaining and maintaining regulatory approvals for marketing new and existing products. Our future growth
and profitability depend to a large extent on our ability to obtain regulatory approvals.



Under the SFDA guidelines for licensing of pharmaceutical products,
all pharmaceutical manufacturers must obtain and maintain Good Manufacturing Practices (“GMP”) certifications.  We
are currently in compliance with the SFDA guidelines and maintain GMP certifications. However, should we fail to receive or maintain
the GMP certifications under the guidelines in the future, our businesses would be materially and adversely affected.



Moreover, the laws and regulations regarding acquisitions of the
pharmaceutical industry in the PRC may also change and may significantly impact our ability to grow through acquisitions.



9





Employees



As of December 31, 2010, we had 188 full-time employees. There are
33 in the administration department, of which 25 have college undergraduate degrees. There are 5 university professors with doctorate
degrees in research and development. There are approximately 150 farmers. All employees are working in our subsidiary located in
China.



Seasonality



Our business is subject to seasonal fluctuations. DAR is planted
during the winter months and is suitable for harvest beginning in the summer.  The prime season for harvest and resulting
sales is typically from July through October, subject to climate conditions.  As a result, we typically enter into contracts
with farmers during the first quarter of the fiscal year for the purchase of raw DAR.  We then process the harvested
DAR and sell products to our customers during the second half of the fiscal year. Consequently, our revenues are received primarily
in the second half of the fiscal year.



Customers



Our business is not reliant upon one customer.  Due to
our arrangement with the DAR Association, we are the exclusive distributor of Sichuan DAR.  This exclusive arrangement
provides significant diversification of our customer base and, as such, keeps us from being reliant on any major revenue-generating
customers, the loss of whom would impact our business.



Research and Development



Our annual research and development expenses for the years ending
December 31, 2010 and 2009 were approximately $1 million per year.



Environment



As described above, we maintain certification with GAP standards.
Consistent with these standards, we maintain an environmentally sound production site and utilize products such as organic fertilizer
to ensure that our DAR and DAR-related products maintain a high quality.  We generally expend 6% of our annual profits
to maintain our production site to ensure compliance with best environmental practices.



Item 1A.  Risk Factors.



The information to be reported under this Item is not required of
smaller reporting companies.



Item 1B.  Unresolved Staff Comments.



The information to be reported under this Item is not required of
smaller reporting companies.



Item 2.  Properties.



There is no private ownership of land in China; all land ownership
is held by the government of China, its agencies and collectives. Land use rights are obtained from the government for periods
ranging from 50 to 70 years, and are typically renewable. Land use rights can be transferred upon approval by the land administrative
authorities of China (State Land Administration Bureau) upon payment of the required transfer fee.



Owned Property



Our main office is located at 343 Sui Zhou Zhong Road, Suining,
Sichuan Province, People’s Republic of China, which is owned by us and has a total area of 1,775 square feet.  No
other businesses operate from this office.



10





We also own a three-story building in Suining, Sichuan Province,
China, with a total area of approximately 15,000 square feet, which contains our administration, sales, and research & development
departments. We purchased this building from a related party.



Leased Property



We lease our warehouse of approximately 2,600 square feet.  Under
the new lease for the year ending December 31, 2010, we pay approximately $2,079 per year.  We renew our lease on a year-to-year
basis, automatically, unless notice is given by one of the parties.



We lease farm land of approximately 861,543 square feet from a cooperative
of farmers.  We renewed our lease in March 2008, and under the new terms of the lease, we pay approximately $7,522 per
year.  The lease expires August 31, 2017, unless notice is given by one of the parties.



Item 3.  Legal Proceedings.



As of the date of this report, we are not a party to any pending
legal proceeding and are not aware of any threatened legal proceeding.



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



None.

11





PART II



Item 5.  Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.



Market Information



Our Class A Common Stock has been quoted on the Over-the-Counter
Bulletin Board (the “OTCBB”) under the symbol “CHRI” since June 22, 2004.  The range of closing
high and low bid quotations for each quarter of the past two (2) fiscal years is as follows:



|FYE 2009           | High    | Low    
|------------------ | ------- | -------
|1/1/09 – 3/31/09   | $0.0045 | $0.0035
|4/1/09 – 6/30/09   | $0.0050 | $0.0045
|7/1/09 – 9/30/09   | $0.0055 | $0.0055
|10/1/09 – 12/31/09 | $0.0076 | $0.0060
|                   |         |        
|FYE 2010           | High    | Low    
|1/1/10 – 3/31/10   | $0.029  | $0.006 
|4/1/10 – 6/30/10   | $0.029  | $0.005 
|7/1/10 – 9/30/10   | $0.016  | $0.005 
|10/1/10 – 12/31/10 | $0.050  | $0.008 



Holders



As of March 24, 2011, there were approximately 4,952 holders of
record of our Common Stock and 159,935,953 shares issued and outstanding.



Dividends



We have not declared or paid any cash dividends on either our Common
Stock since our formation, and do not presently anticipate paying any cash dividends on our Common Stock in the foreseeable future.  We
currently intend to retain any future earnings to finance the expansion and development of our business.  The future
payment of cash dividends on any class of our Common Stock will depend on our earnings, capital requirements and financial position,
applicable requirements of the Delaware General Corporation Law, general economic conditions and other factors considered relevant
by our board of directors.



There are no contractual restrictions on our ability to declare
and pay dividends.



Securities Authorized for Issuance Under Equity Compensation
Plan



Item 6.  Selected Financial Data.



The information to be reported under this Item is not required of
smaller reporting companies.



12





Item 7.  Management’s Discussion
and Analysis of Financial Condition and Results of Operations.



Forward Looking Statements



Certain statements in this report, including statements of our expectations,
intentions, plans and beliefs, including those contained in or implied by “Management's Discussion and Analysis of Financial
Condition and Results of Operations” and the Notes to Consolidated Financial Statements, are “forward-looking statements”,
within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are
subject to certain events, risks and uncertainties that may be outside our control. The words “believe”, “expect”,
“anticipate”, “optimistic”, “intend”, “will”, and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. These
forward-looking statements include statements of management's plans and objectives for our future operations and statements of
future economic performance, information regarding our expansion and possible results from expansion, our expected growth, our
capital budget and future capital requirements, the availability of funds and our ability to meet future capital needs, and the
assumptions described in this report underlying such forward-looking statements. Actual results and developments could differ materially
from those expressed in or implied by such statements due to a number of factors, including, without limitation, those described
in the context of such forward-looking statements, our expansion and acquisition strategy, our ability to achieve operating efficiencies,
our ability to successfully develop, manufacture and deliver DAR and related products on a timely basis and in the prescribed condition,
evolving standards in the TCM industry, domestic and international regulatory matters, general economic and business conditions,
the strength and financial resources of our competitors, our ability to raise sufficient capital in order to effectuate our business
plan, our ability to find and retain skilled personnel and key executives, the political and economic climate in which we conduct
operations and the risk factors described from time to time in our other documents and reports filed with the SEC.



General



All references in this Form 10-K to the “Company,” “CHRI,”
the “Registrant,” “we,” “us” or “our” are to China Health Resource, Inc., a Delaware
corporation.  These terms also refer, where context requires, to our subsidiary corporation, Suining Shi Yinfa Bai Zhi
Chan Ye You Xian Gong Si, a corporation organized and existing under the laws of the Peoples’ Republic of China (“Yinfa”),
acquired in August 2006.



We were incorporated in the State of Delaware on February 26, 2002.
In June and July 2002, we acquired approximately 99% of the outstanding shares of Voice Diary Ltd., an Israeli corporation (“VDL”),
through an exchange of shares of the Company with shareholders of VDL. On June 13, 2006, we, as the acquirer, executed a Plan of
Exchange with Yinfa (acquiree), the shareholders of Yinfa and the Company’s then majority shareholders, pursuant to which
we issued 30,000,000 (pre-forward split) new shares of our Common Stock to the Yinfa shareholders in a transaction exempt from
the registration requirements of the Securities Act of 1933, as amended, in reliance upon Regulation S thereunder, in exchange
for all of their shares of registered capital of Yinfa. As a result, Yinfa became our wholly-owned subsidiary. Yinfa was founded
on April 24, 2001, with registered capital of US $125,500 (RMB 1,000,000) and total assets of US $1,475,795. Yinfa’s business
incorporates a self-owned production base and a network of DAR (as defined below) associates, farmers and research and development
affiliates. The transaction was treated for accounting purposes as a capital transaction and recapitalization by the accounting
acquirer and as a re-organization by the accounting acquiree. We disposed of VDL on August 22, 2006 pursuant to the agreement between
the Company, VDL and Arie Hinkis, our former president. On May 21, 2007, we changed our name to China Health Resource, Inc. to
more accurately reflect our business operations.



Our Business



Since the completion of the Plan of Exchange with Yinfa, our core
business has been in pharmaceuticals and the continued operations of Yinfa. Yinfa is a Chinese pharmaceutical company focused on
developing and commercializing Dahurian Angelica Root (“DAR”), a popular traditional Chinese medicine (“TCM”).
Our business plan includes distributing DAR and its related products for the treatment of pain, swelling and pustule. DAR is a
popular herb employed extensively as an ingredient in food, medicine and cosmetics. The Suining district in China’s Sichuan
Province is the major planting and production area in China for DAR as a result of the local climate and soil properties. Over
70% of DAR for general use and 100% of DAR for pharmaceutical use in China is produced in Suining.



In May 2005, we applied for and obtained Good Agricultural Practice
of Medical Plants and Animals (“GAP”) certification for DAR, in cooperation with Sichuan Yinfa Resource Development
Group Co. Ltd., our affiliate (“Yinfa Resource”). The standards which must be met to obtain certification include the
study of our environment quality, seed quality, minimum pesticides, and fertilizer. These standards were adopted by the Chinese
State Food and Drug Administration (the “SFDA”) . Our GAP project involves approximately 133,334 square meters of experimental
planting fields, and 1,333,340 square meters of fields run by companies we have hired, all of which passed inspection by the SFDA,
on February 26, 2006. The GAP certificate has been issued in name of our partner Yinfa Resource. GAP certification means that our
planning, quality, and manufacturing of DAR have met the requisite high and certifiable standard.



13





In 2007, Yinfa contracted with the Sichuan Province Suining City
DAR Association (“Association”) and received the exclusive rights to the “Suining Sichuan Angelic” certified
trademark from the Chinese State Administration of Industry and Commerce through December 13, 2016. As holder of the rights to
the trademark, Yinfa is entitled to receive a management fee of 1RMB (or approximately US $0.14) per kilogram of DAR (including
packaging fees) from any user of the trademark, of which 60% may be used by Yinfa for further development and investment of its
DAR business and the remaining 40% must be paid to the Association for related expenses. In addition, Yinfa is entitled to receive
100% of the revenue stream from the use of the DAR trademark through December 13, 2016 and 95% of the revenue stream thereafter.
There are approximately 235 regional certification trademarks in China, including 65 for natural resources, of which over 20 are
for natural herb resources.



In December 2008, we leased an additional 3,262 acres from Yinfa
Resource for commercial uses, as described above under Item 2. “Property.”



We believe our business model will help facilitate the process of
growing and commercializing DAR, research and development, sales and marketing. Our current DAR-related products include the Bailing
Capsule, Yisheng Capsule, Kimchee-Mate and Fragrant Bag, all of which have been certified by the SFDA and are being sold into the
market via regional distributors throughout China. We will continue to explore the development and addition of DAR in a range of
foods, medicines and cosmetics. In addition, we continue to consider and explore opportunities to expand our current asset base
and product offerings to increase our revenues and enhance shareholder value. These opportunities may include, but are not limited
to, acquisitions or in-licensing of additional products and the combination or merger of Yinfa with other Chinese companies in
synergistic or complementary industries.



Seasonality



Our business is subject to seasonal fluctuations. DAR is planted
during the winter months and is suitable for harvest beginning in the summer. The prime season for harvest and resulting sales
is typically from July through October, subject to climate conditions. As a result, we typically enter into contracts with farmers
during the first quarter of the fiscal year for the purchase of raw DAR. We then process the harvested DAR and sell products to
our customers during the second half of the fiscal year. Consequently, our revenues are received primarily in the second half of
the fiscal year.



Critical Accounting Policies



Revenue recognition



Our revenue recognition policies are in accordance with Staff Accounting
Bulletin No. 104. Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement
exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability
to collect is reasonably assured. These criteria are generally satisfied at the time of shipment when risk of loss and title passes
to the customer.



We recognize revenue when the goods are delivered and title has
passed. Sales revenue represents the invoiced value of goods, net of a value-added tax (“VAT”). All of our products
that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price or at a rate approved
by the Chinese local government. This VAT may be offset by the VAT paid by us on raw materials and other materials included in
the cost of producing their finished product.



Inventory



Inventory includes raw material, package material, low-value consumables
and merchandise. We have adopted a perpetual inventory system and inventories are recorded at actual cost. Raw material, package
material and merchandise are priced at cost upon acquisition, and with the weighted average method upon issuance and shipment.
Low-value consumables are amortized at 50% of the amount upon application and amortized an additional 50% upon obsolescence.



14





Property, Plant, and Equipment



Property, plant, and equipment are recorded at cost, less accumulated
depreciation and impairment. Repairs and maintenance expenditures, which are not considered improvements and do not extend the
useful life of property, plant, and equipment, are expensed as incurred. The cost and related accumulated depreciation, applicable
to sold or no longer in service property, plant, and equipment, are eliminated from the accounts and any gain or loss is included
in the statement of operations.



Depreciation is calculated to write-off the cost or basis of the
property, plant, and equipment over their estimated useful lives for the date on which they become fully operational and after
taking into account their estimated residual values (salvage value), using the straight-line method, at the following rates per
year:



|Equipment: | Straight-line for 5 to 20 years with a 3% salvage value
|---------- | -------------------------------------------------------
|Building:  | Straight-line for 20 years with a 5% salvage value     



We recognize an impairment loss on property, plant, and equipment
when evidence, such as the sum of expected future cash flows (undiscounted and without interest charges), indicates that future
operations will not produce sufficient revenue to cover the related future costs, including depreciation, and when the carrying
amount of the asset cannot be realized through sale. Measurement of the impairment loss is based on the fair value of the assets.



Results of Operations for the Years Ended December 31, 2010
and 2009



Highlights



Our total assets at December 31, 2010 were US $5,728,151 compared
to December 31, 2009 were US $2,190,144. Total liabilities increased to US $1,908,962 at December 31, 2010 from US $1,302,794 at
December 31, 2009, principally due to an increase in the trade accounts payable and an increase in notes payable.



|Profit/Loss                  |  | For  the year ended
|---------------------------- |  | -------------------
|                             |  | December 31, 2010  
|Operating Income (Loss)      |  |                    
|Net Income (Loss) Before Tax |  |                    
|Corp. Income Tax             |  |                    
|Net Income (Loss)            |  |                    



Revenues



Our revenues for the year ended December 31, 2010 were US $10,282,207,
an increase of 134% over revenues of US $4,377,463for the year ended December 31, 2009. The increase in sales revenues
was due primarily to an increase in the volume and unit price of sales of DAR received during 2010. Most of the revenue growth
was attributable to increased sales in raw DAR. Our sales arrangements are not subject to any warranties.



Cost of Sales; Gross Profit



Cost of sales includes expenses directly related to manufacturing
and selling our products, including costs of raw materials purchased from farmers, product delivery and direct labor costs. Our
cost of sales for the year ended December 31, 2010 was US $5,767,564, or approximately 56% of revenues, compared to US $3,736,867,
or approximately 85% of revenues, for the year ended December 31, 2009. The increase in costs of sales is principally due to increased
costs for our product, Bailing Capsules, increased purchasing cost of DAR, and improvements to the DAR-related products’
packaging. The increased cost of raw DAR is attributable to increased fertilizer and labor costs in the farming process over last
year.



15





Gross profit for the year ended December 31, 2010 increased by approximately
604% to US $4,514,643 from US $640,596 for the year ended December 31, 2009. Gross profit margin for the
period ended December 31, 2010 was 44% compared to 15% for the year ended December 31, 2009.



Operating Expenses



Operating expenses for the year ended December 31, 2010 decreased
by 39% to US $769,754 from US $1,253,721for the year ended December 31, 2009. The largest component of operating expenses
is attributable to selling, general and administrative (“SG&A”) expense consisting primarily of administrative
expenses. SG&A decreased overall to US $751,532 for 2010 compared to US $1,184,213for 2009. The decrease is primarily
due to a significant decrease in fees to consultants in 2010.



Other Income/Expense



We received other income of US $975 attributable to the rental of
store. Interest expense for 2010 was US $18,222 compared to US $69,508 in 2009.



Impact of Inflation



We believe that inflation has had a negligible effect on operations
during 2010. The inflation rate in the Sichuan Province has been lower than the average national inflation rate for China. However,
the rate of inflation in China increased in 2010 and a drought in 2010 also affected all agricultural prices. We believe that we
can offset any inflationary increases in the cost of sales by continuing to increase our sales of DAR in response to continued
demand and by improving operating efficiencies.



Taxes



According to the Corporate Income Tax Law of China, companies without
any tax abatement programs are charged at a 25% income tax rate. As of December 31, 2010, we accrued income taxes of US $1,038,578.
As of December 31, 2009, we accrued income taxes of US $79,807.



Net Income



We had net income for the year ended December 31, 2010
of US $2,707,286, or US $0.02 per share of Common Stock, compared to a net loss for the year ended December 31, 2009 US (US $512,872).
Comprehensive income for the year ended December 31, 2010 was US $2,785,881, a 651% increase from a comprehensive loss of US (US
$505,252) for the year ended December 31, 2009. The deterioration in our operating results for 2010 is attributable principally
to increased sales, lower SG&A expense, and a foreign currency translation gain between the RMB and U.S. dollar of US $78.595.



We are working to strengthen our internal management processes and
to grow our sales revenues, while maintaining an efficient cost structure. However, there can be no assurance that we will achieve
or maintain continuing profitability, or that revenue growth will continue in the future.



Liquidity and Capital Resources



Cash flows used in operating activities were US $125,636during
the year ended December 31, 2010, compared to cash flows of US $285,828 used in operating activities during the year ended December
31, 2009. Decrease in cash flows from operations in 2009 were due primarily to an reduction of notes payable for consulting services
and increase of accounts receivable, prepaid expenses, accounts payable, and notes payable.



16





Cash flows used in investing activities was (US $11,129)for
the year ended December 31, 2010 from US $196,243for the year ended December 31, 2009. Cash flows used in investing
activities during 2010 was due to the purchases of property, plant and equipment.



Cash flows provided by financing activities for the
year ended December 31, 2010 was US $206,756 compare to US $0 for the year ended December 31, 2009. The increase in cash flows
from financing activities was due to the increase in borrowing and loans.



On December 27, 2010, the Company subsidiary corporation, Suining
Shi Yinfa Bai Zhi Chan Ye You Xian Gong Si (“Yinfa”), entered into a short-term loan agreement with Suining City Commercial
Bank (“Bank Loan”). The Bank Loan provides the amount of RMB 3,000,000 (approximately US $451,467) for a term from
December 27, 2010 to December 26, 2011 at a fixed annual interest rate of 8.34%, with interest is payable monthly. As part of that
transaction, the Company entered into a bank loan security agreement (“Bank Collateral Agreement”) which provides for
the collateralization of its office building located at ground floor, the 2 ndfloor and the 3 rdfloor of
the Estate Management Building of Yinhejiayuan (address: No. 188 Xishan Road, Suining).



On December 27, 2010, the Company entered into an unsecured promissory
note agreement (“Jiayin Wang Note”) with Mr. Jiayin Wang, the company’s Chairman, President, and Chief Executive
Officer. The Jiayin Wang Note provides Yinfa with RMB 3,000,000 (approximately US $451,467) from Mr. Wang, payable after one year
on December 26, 2011.



Overall, we have funded our cash needs from inception through December
31, 2010 with a series of debt and equity transactions, primarily with related parties. If we are unable to receive additional
cash from our related parties, we may need to rely on financing from outside sources through debt or equity transactions. Our related
parties are under no legal obligation to provide us with capital infusions. Failure to obtain such financing could have a material
adverse effect on operations and financial condition.



We had cash of US $90,306 on hand as of December 31, 2010, an increase
of US $72,095 from the beginning of the year and attributable in substantial part to an increase in cash inflow and a smaller foreign
currency translation. Currently, we have enough cash to fund our operations for about nine (9) months. This is based on current
cash flows from financing activities and projected revenues. If the projected revenues fall short of needed capital we may not
be able to sustain our capital needs. We will then need to obtain additional capital through equity or debt financing to sustain
operations for an additional year. Our current level of operations would require capital of approximately US $250,000 to sustain
operations through year 2011 and each year thereafter.



On a long-term basis, our liquidity is dependent on continuation
and expansion of our operations, receipt of revenues, and additional infusions of capital and debt financing. Our current capital
and revenues are insufficient to fund such expansion. Modifications to our business plans may require additional capital for us
to operate. For example, if we are unable to raise additional capital in the future we may need to curtail our number of product
offers or limit our marketing efforts to the most profitable geographical areas. This may result in lower revenues and market share
for us. In addition, there can be no assurance that additional capital will be available to us when needed or available on terms
favorable to us.



Demand for our products and services will be dependent on, among
other things, market acceptance of our products, the Chinese TCM in general, and general economic conditions, which are cyclical
in nature. Inasmuch as a major portion of our activities is the receipt of revenues from the sales of our products, our business
operations may be adversely affected by our competitors and prolonged recessionary periods.



Our success will be dependent upon implementing our plan of operations
and the risks associated with our business plans. We manage the processing and DAR distribution business to retail consumers and
wholesale buyers. We plan to strengthen our position in these markets and to expand our operations through aggressively marketing
our products and our concept.



Off-Balance Sheet Arrangements



As of December 31, 2010, we did not have any off-balance sheet
arrangements.



17





Item 7A.  Quantitative and Qualitative
Disclosures About Market Risk.



The information to be reported under this Item is not required of
smaller reporting companies.



Item 8.  Financial Statements and Supplementary
Data.



The consolidated financial statements of the Company and notes thereto
are included at the end of Part IV of this annual report, beginning at page F-1.



Item 9.  Changes in and Disagreements
With Accountants on Accounting and Financial Disclosure.



None.



Item 9A.  Controls and Procedures.



Evaluation of Disclosure Controls and Procedures



We maintain disclosure controls and procedures that are designed
to ensure that the information required to be disclosed in the reports that we file under the Securities Exchange Act of 1934 (the
"Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.  In
designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching
a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship
of possible controls and procedures.



As required by SEC Rule 13a-15(b), we carried out an evaluation,
under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our fourth fiscal quarter
covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective at the reasonable assurance level.



Management’s Report On Internal Control Over Financial
Reporting



Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act.



The Company’s management, including the Company’s Chief
Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2010.  In making this assessment, the Company’s management used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.  The
COSO framework is based upon five integrated components of control: control environment, risk assessment, control activities, information
and communications and ongoing monitoring.



Based on the assessment performed, management has concluded that
the Company’s internal control over financial reporting, as of December 31, 2010, is effective and provides reasonable assurance
regarding the reliability of its financial reporting and the preparation of its financial statements in accordance with generally
accepted accounting principles.



There has been no change in our internal controls over financial
reporting during our fourth fiscal quarter ended December 31, 2010, that has materially affected, or is reasonably likely to materially
affect, our internal controls over financial reporting.



18





Because of its inherent limitations, our internal control over financial
reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. The continued effectiveness of our internal
control over financial reporting is subject to risks, including that the control may become inadequate because of changes in conditions
or that the degree of compliance with our policies or procedures may deteriorate.



This annual report does not include an attestation report of the
Company’s registered independent public accounting firm regarding internal control over financial reporting.  Management’s
report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management’s report in this annual report.



Item 9B.  Other Information.



None.

19





PART III



Item 10.  Directors, Executive Officers
and Corporate Governance.



Our directors and executive officers and their respective ages
as of March 31, 2010, are as follows:



|Name        |  | Age |  | Principal Positions                                                                   
|----------- |  | --- |  | --------------------------------------------------------------------------------------
|Jiayin Wang |  | 59  |  | Chief Executive Officer, President, and Director
        (Principal Executive Officer)
|Weihai Liu  |  | 40  |  | Chief Financial Officer
        (Principal Financial Officer)                         
|Bing Wang   |  | 42  |  | Director                                                                              
|Ping Gao    |  | 45  |  | Director                                                                              





The following describes the business experience of each of our executive
officers and directors, including other directorships held in reporting companies, if any:



Jiayin Wang.  Mr. Jiayin Wang has served as our
President and as director of the Corporation since October 20, 2008.  He founded YinFa Resource, an affiliate of the
Corporation, in 2001 and has continuously served as its president and chairman.  Mr. Wang has been the People’s
Senator of Suining City, Sichuan Province, the PRC since 1995 and the Chairman of Sichuan Province DAR Association since 2001.
Mr. Wang was named Excellent Entrepreneur of Sichuan Province in 2004, National Entrepreneur Star Award in 2001 and 2004, Entrepreneur
Star of Sichuan Province in 2001 and 2004 and Top Ten Entrepreneur Star of Suining City in 2005, among many other awards. On August
20, 2010, Mr. Wang was appointed Chief Executive Officer of the Corporation.



Weihai Liu.  Mr. Weihai Liu has served as our Chief
Financial Officer of the Corporation since September 29, 2010. From 2005 to most recently, Mr. Liu was Head of Finance in Guangdong
Dongsong Sanxiong Electrical Appliance Co., Ltd where he was in charge of all aspects in budget management, accounting, financial
management, taxation planning, assets and investment risk management. He also created systems of cost accounting, cost control,
cost analysis, internal audit and also the financial management of all branch companies. From 1996 to 1998, he served as CFO in
Guangzhou Longfa Group, which had four subsidiaries located in Beijing and Guangdong Province. Mr. Liu is a Certified Public Accountant
in China.



Bing Wang.  Mr. Bing Wang has served as our
Independent Director of the Corporation since 2006. Mr. Wang has extensive experience in business and investment management.  Mr.
Wang has a strong professional relationship with the Sichuan provincial government and the Suining municipal government.



Ping Gao.  Mr. Ping Gao has served as our Independent
Director of the Corporation since 2010. In September 2004, he was President of the Suining City Leprosy Hospital. In August 2000,
he was Vice President of Suining City Public Hospital. In August 1982, he was Lead Botanist at the Yajiang County Forestry Bureau
for 15 years. Mr. Ping graduated from Xiamen University with an undergraduate engineering degree in 1964.



Term of Office



All of our directors hold office until the next annual general meeting
of the shareholders or until their successors are elected and qualified.  Our officers are appointed by our board of
directors and hold office until their earlier death, retirement, resignation or removal.



Committees of the Board of Directors



Our board of directors intends to establish an audit committee,
a compensation committee and a nominating and corporate governance committee.  Our board may establish other committees
from time to time to facilitate the management of our company; however, we have not yet established any such committees.



20





Audit committee.  Our audit committee will
oversee a broad range of issues surrounding our accounting and financial reporting processes and audits of our financial statements,
including by (1) assisting our board in monitoring the integrity of our financial statements, our compliance with legal and regulatory
requirements, our independent auditor's qualifications and independence and the performance of our internal audit function and
independent auditors, (2) appointing, compensating, retaining and overseeing the work of any independent registered public accounting
firm engaged for the purpose of performing any audits, reviews or attest services, and (3) preparing the audit committee report
that may be included in our annual proxy statement or annual report on Form 10-K.  We will have at least three directors
on our audit committee, each of whom will be independent under the requirements of the NASDAQ Capital Market, the Sarbanes-Oxley
Act and the rules and regulations of the SEC.  We have not yet formed our audit committee.



Compensation committee.  Our compensation
committee will review and recommend our policies relating to compensation and benefits for our executive officers and other significant
employees, including reviewing and approving corporate goals and objectives relevant to compensation of our Chief Executive Officer
and other executive officers, evaluating the performance of our executive officers relative to goals and objectives, determining
compensation for these executive officers based on these evaluations and overseeing the administration of our incentive compensation
plans.  The compensation committee will also prepare the compensation committee report that may be included in a subsequent
annual report on Form 10-K.  We will have at least two directors on our compensation committee, each of whom will
be independent under the requirements of the NASDAQ Capital Market.  We do not yet have a compensation committee.



Nominating and corporate governance committee.  Our
nominating and corporate governance committee will (1) identify, review and recommend nominees for election as directors, (2) advise
our board of directors with respect to board composition, procedures and committees, (3) recommend directors to serve on each committee,
(4) oversee the evaluation of our board of directors and our management, and (5) develop, review and recommend corporate governance
guidelines and policies. We will have at least two directors on our nominating and corporate governance committee, each of whom
will be independent under the requirements of the NASDAQ Capital Market.  We do not yet have a nominating and corporate
governance committee.



Code of Ethics



The Company has adopted a Code of Ethics for its directors, executive
officers and employees.



Shareholder Communications



The Corporation provides a process for stockholders to send communications
to the Board.  Information regarding stockholder communications with the Board can be found on the Corporation’s
Web site at http://www.chinahealthresource.com..



Compliance with Section 16(a) of the Act



Section 16(a) of the Exchange Act requires the Corporation’s
officers and Directors, and persons who beneficially own more than ten percent of a registered class of the Corporation’s
equity securities (collectively, the “Reporting Persons”) to file reports of ownership and changes in ownership with
the SEC. Such Reporting Persons are required by the SEC rules to furnish the Corporation with copies of all Section 16 forms they
file.  Based solely on its review of the copies of such filings, the Corporation believes that during the fiscal year
ended December 31, 2010, the following filings were late: Mr. Jiayin Wang will file one late report covering a total of one late
transaction.



21





Item 11.  Executive Compensation.



Compensation Discussion and Analysis



Philosophy and objectives



For the period December 31, 2009 through December 31, 2010, all
compensation decisions were made by our board of directors.  The primary objective of our compensation policies and programs
with respect to executive compensation is to serve our shareholders by attracting, retaining and motivating talented and qualified
individuals to manage and lead our business.  We will focus on providing a competitive compensation package that provides
significant short and long-term incentives for the achievement of measurable corporate and individual performance objectives.  We
intend to establish a compensation committee and future decisions regarding executive compensation will be the responsibility of
that committee.



Elements of executive compensation



Base salary.  We will provide our senior management
with a level of base salary in the form of cash compensation appropriate to their roles and responsibilities.  Base salaries
for our executives are established based on the executive’s qualifications, experience, scope of responsibilities, future
potential and past performance and cash available to pay executive compensation.  Base salaries will be reviewed annually
and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance
and experience.  We will consider four factors in determining the base salaries of our named executive officers.  These
four factors are, in order of significance, (1) creating an incentive to achieve corporate goals, (2) individual performance, (3)
cash available to pay compensation and (4) the total compensation each executive officer previously received while employed with
us, if any.



Incentive cash bonuses.  Our practice will be to
seek to award incentive cash bonuses to our executive officers based upon their individual performance, as well as our overall
business and strategic objectives.  In determining the amount of cash bonuses paid to our named executive officers, we
will consider the same four factors as in determining their base salaries.  See “Summary Compensation Table”
below.



Compliance with Sections 162(m) and 409A of the Internal Revenue
Code



Section 162(m) of the Internal Revenue Code limits the deductibility
of compensation in excess of $1 million paid to certain executive officers, unless such compensation qualifies as performance-based
compensation.  Among other things, in order to be deemed performance-based compensation for Section 162(m) purposes,
the compensation must be based on the achievement of pre-established, objective performance criteria and must be pursuant to a
plan that has been approved by our shareholders.  At least for the next several years, we expect the cash compensation
paid to our sole executive officer and other executive officers, if any, to be below the threshold for non-deductibility provided
in Section 162(m), and our equity incentive plans will afford our compensation committee with the flexibility to make a variety
of types of equity awards to our executive officers, the deductibility of which will not be limited under Section 162(m).  However,
our compensation committee, which we expect to form, will fashion our future equity compensation awards.  However, we
do not now know whether any such awards will satisfy the requirements for deductibility under Section 162(m).



We also currently intend for our executive compensation program
to satisfy the requirements of Internal Revenue Code Section 409A, which addresses the tax treatment of certain nonqualified deferred
compensation benefits.



Executive Compensation



The following table sets forth information concerning all cash and
non-cash compensation awarded to, earned by or paid to our principal executive officer as of the end of fiscal 2010 and the two
most highly compensated executive officers as of the end of fiscal 2010. We refer to these executive officers as our “Named
Executive Officers.”

22







Summary Compensation Table



|                                                    | Year    | Salary  | Bonus    | Stock  Awards | Option  Awards | Non-Equity  Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total  
|--------------------------------------------------- | ------- | ------- | -------- | ------------- | -------------- | --------------------------------------- | ----------------------------------------------------------------------- | ---------------------- | -------
|                                                    | ($)     | ($)     | ($)      | ($)           | ($)            | ($)                                     | ($)                                                                     | ($)                   
|                                                    |         |         |          |               |                |                                         |                                                                         |                       
|Name and Principal                                  |         |         |          |               |                |                                         |                                                                         |                        |        
|Position (a)                                        | (b)     | (c)     | (d)      | (e)           | (f)            | (g)                                     | (h)                                                                     | (i)                    | (j)    
|Jiayin Wang (1)                                     | 2010    | $0      | $138,000 | $140,000      | $19,333        | -                                       | -                                                                       | -                      | $2,010 
|Principal Executive Officer, President and Director | 2009    | $29,274 | -        | -             | -              | -                                       | -                                                                       | -                      | $42,000
|2008                                                | $29,274 | $12,726 | -        | -             | -              | -                                       | -                                                                       | -                     
|                                                    |         |         |          |               |                |                                         |                                                                         |                        |        
|Weihai Liu (2)                                      | 2010    | $0      | -        | -             | -              | -                                       | -                                                                       | -                      | $8,000 
|Principal Financial Officer                         | 2009    | -       | -        | -             | -              | -                                       | -                                                                       | -                      | $8,000 
|2008                                                | -       | -       | -        | -             | -              | -                                       | -                                                                       | $8,000                
|                                                    |         |         |          |               |                |                                         |                                                                         |                        |        
|Jiang Chen (3)                                      | 2010    | -       | -        | -             | -              | -                                       | -                                                                       | -                      | $8,000 
|Former Principal Executive Officer and Director     | 2009    | $8,000  | -        | -             | -              | -                                       | -                                                                       | -                      | $8,000 
|2008                                                | $8,000  | -       | -        | -             | -              | -                                       | -                                                                       | $8,000                
|                                                    |         |         |          |               |                |                                         |                                                                         |                        |        
|Yi Zhou (4)                                         | 2010    | -       | -        | -             | -              | -                                       | -                                                                       | -                      | $11,710
|Former Principal Financial Officer and Director     | 2009    | $11,710 |          | -             | -              | -                                       | -                                                                       | -                      | $15,000
|2008                                                | $11,710 | $3,290  | -        | -             | -              | -                                       | -                                                                       | -                     
|                                                    |         |         |          |               |                |                                         |                                                                         |                        |        
|Jiguang Wang(5)                                     | 2010    | -       | -        | -             | -              | -                                       | -                                                                       | -                      | -      
|Former President and Former Director                | 2009    | -       | -        | -             | -              | -                                       | -                                                                       | -                      | $10,000
|2008                                                | $10,000 | -       | -        | -             | -              | -                                       | -                                                                       | $10,000               
|                                                    |         |         |          |               |                |                                         |                                                                         |                        |        
|Ying Zhong(6)                                       | 2010    | -       | -        | -             | -              | -                                       | -                                                                       | -                      | -      
|Former Chief Financial Officer and Former Director  | 2009    | -       | -        | -             | -              | -                                       | -                                                                       | -                      | $10,000
|2008                                                | $10,000 | -       | -        | -             | -              | -                                       | -                                                                       | $10,000               



|(1) | Mr. Jiayin Wang’s employment with the Corporation as President commenced in October 20, 2008, and his employment as Principal Executive Officer commenced August 20, 2010
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Mr. Weihai Liu employment with the Corporation as Principal Financial Officer commenced in September 29, 2010.
|--- | --------------------------------------------------------------------------------------------------------------



|(3) | Mr. Jiang Chen’s employment with the Corporation terminated in August, 2010.
|--- | ----------------------------------------------------------------------------



|(4) | Ms. Yi Zhou’s employment with the Corporation terminated in September, 2010.
|--- | ----------------------------------------------------------------------------



|(5) | Mr. Jiguang’s employment with the Corporation terminated in October 20, 2008.
|--- | -----------------------------------------------------------------------------



|(6) | Ms. Zhong’s employment with the Corporation terminated in October 20, 2008.
|--- | ---------------------------------------------------------------------------



23





Summary of Executive Compensation



Jiayin Wang.   Mr. Jiayin Wang served as President and
director of the Board under a 3 year term beginning in 2008. Mr. Wang was to receive a an annual salary of RMB 200,000, or approximately
U.S.$29,851 for the fiscal year 2010, based upon the closing foreign exchange rate published by Bloomberg on March 25, 2010 of
U.S.$1.00 = RMB 6.5615 (the “RMB Rate”).  Mr. Wang elected to forego his salary for 2010. On August 20, 2010,
Mr. Wang accepted the Corporation’s offer regarding his employment with the Corporation as its Chief Executive Officer. His
position as Chief Executive Officer offers no salary, although he was granted a signing bonus of U.S. $50,000 payable in shares
of the Company's Common Stock based on a price per share of $0.00782, the average of the closing prices of the Common Stock as
quoted on the OTC Bulletin Board for the five (5) trading days ending on such date. Mr. Wang received 6,393,862 shares of Common
Stock as a signing bonus which shares are not registered under the U.S. Securities Act of 1933, as amended (the "1933 Act").
On August 20, 2010, Mr. Wang also received a past performance bonus in the amount of U.S. $88,000 payable in shares of Common Stock
(shares not registered under the 1933 Act) based on a price per share of $0.00782, the average of the closing prices of the Common
Stock as quoted on the OTC Bulletin Board for the five (5) trading days ending on such date. Mr. Wang received 11,253,197 shares
of Common Stock that are not registered under the 1933 Act under this bonus. Mr. Wang was also offered stock options to purchase
up to six million (6,000,000) shares of common stock at a price of $.02 per share vesting over 18 months in equal monthly installments
pursuant to a Stock Option Agreement with the Company which is granted pursuant to the company’s 2009 Omnibus Incentive Plan
and have a grant date of August 20, 2010.



Weihai Liu. On September 29, 2010, Mr. Liu accepted the Corporation’s
offer regarding his employment with the Corporation as its Chief Financial Officer. Mr. Liu was to receive an annual salary of
RMB 80,000, (approximately U.S. $11,941). Mr. Liu elected to forego this salary for 2010.



Jiang Chen.  On August 20, 2010, Mr. Chen resigned as
Chief Executive Officer. There is no severance or termination agreement.



Yi Zhou. On September 29, 2010, Ms. Zhou resigned as Chief Financial
Officer. There is no severance or termination agreement.



Other than the agreements mentioned herein, the Corporation has
no employment agreements with any of our named executive officers, nor do we have any compensatory plans or arrangements with respect
to any named executive officers that results or will result from the resignation, retirement or any other termination of such executive
officer's employment with the Corporation or from a change-in-control of the Corporation or a change in the named executive officer's
responsibilities following a change-in-control wherein the amount involved, including all periodic payments or installments, exceeds
$100,000.



Outstanding Equity Awards at Fiscal Year-End



We had no outstanding options, warrants or rights to acquire shares
of our common stock under plans either approved, or not approved, by our stockholders.  Board members are eligible to
participate in the 2009 Omnibus Incentive Plan after the Effective Date.



24





Compensation of Directors



The table below summarizes the compensation of all persons who served
as a Director of the Corporation in fiscal 2009:



DIRECTOR COMPENSATION



|            | Fees Earned
        or Paid in Cash | Stock
        Awards | Option
        Awards | Non-Equity
        Incentive Plan
        Compensation | Change in  Pension Value  and  Nonqualified  Deferred  Compensation  Earnings | All Other
        Compensation | Total
|----------- | ----------------------------------- | -------------------- | --------------------- | ------------------------------------------------------ | ----------------------------------------------------------------------------- | ------------------------------ | -----
|            | ($)                                 | ($)                  | ($)                   | ($)                                                    | ($)                                                                           | ($)                            | ($)  
|Name (a)    | (b)                                 | (c)                  | (d)                   | (e)                                                    | (f)                                                                           | (g)                            | (j)  
|Jiayin Wang | -                                   | -                    | -                     | -                                                      | -                                                                             | -                              | -    
|Bing Wang   | -                                   | -                    | -                     | -                                                      | -                                                                             | -                              | -    
|Gao Ping    | -                                   | -                    | -                     | -                                                      | -                                                                             | -                              | -    
|Gewei Wang  | -                                   | -                    | -                     | -                                                      | -                                                                             | -                              | -    
|Yi Zhou     | -                                   | -                    | -                     | -                                                      | -                                                                             | -                              | -    



For the year ended December 31, 2010, no cash compensation was paid,
and no equity grants were made, to the Corporation’s directors.  Mr. Jiayin Wang's compensation as an executive
officer of the Corporation is disclosed under "Executive Compensation - Summary Compensation Table."  Usually,
the Board reviews the level of compensation it receives for its service every year.  The Board may take action at any
time to amend the amount or type of compensation it receives.



Item 12.  Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.



The following table sets forth certain information regarding beneficial
ownership of our common stock as of March 31, 2010, for:



•	each person or group known to us to
beneficially own 5% or more of our common stock;



•	each of our directors and director
nominees;



•	each of our named executive officers;
and



•	all of our executive officers and
directors as a group.



Unless otherwise indicated below, to our knowledge, all persons
listed below have sole voting and investment power with respect to their shares of common stock, except to the extent authority
is shared by spouses under applicable law.  Unless otherwise indicated below, each entity or person listed below maintains
an address of 343 Sui Zhou Zhong Road, Suining City, Sichuan Province, P.R. China.



The number of shares beneficially owned by each shareholder is determined
under rules promulgated by the SEC.  There are no shares of common stock as to which any person has the right to acquire
beneficial ownership within 60 days after March 31, 2011 through the exercise of any stock option, warrant or other right. The
percentage ownership is based on 166,935,953 shares of common stock outstanding as of March 24, 2011.



In Sept 2008 Evotech Capital, SA signed consulting agreement with
the Corporation. As of January 2009 outstanding fees were $80,000. On July 1, 2010 a convertible promissory note was signed for
the $80,000 convertible at 0.008 per share. In January, 2011, 7,000,000 shares were converted. (3,000,000 shares are still not
converted).





25







|Beneficial owner                                                                                                                   | Number of shares beneficially Owned | Percentage of shares outstanding (1)
|---------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ------------------------------------
|Common Stock, Lei Guo (2), No. 188 Xishan Road, Chuanshan District, Suining City, Sichuan Province, the People’s Republic of China | 43,000,000 (2)                      | 25.76%                              
|                                                                                                                                   |                                     |                                     
|Common Stock, Zhi Min Zheng, Xili Liulitun, Chaoyang District, Beijing, People’s Republic of China                                 | 22,122,488                          | 13.25%                              
|                                                                                                                                   |                                     |                                     
|Jiayin Wang                                                                                                                        | 53,393,862                          | 31.98%                              
|                                                                                                                                   |                                     |                                     
|Jiang Chen
        Principal Executive Officer                                                                                     | 0                                   | 0.0%                                
|                                                                                                                                   |                                     |                                     
|Yi Zhou
        Principal Financial Officer                                                                                        | 0                                   | 0.0%                                
|                                                                                                                                   |                                     |                                     
|Gewei Wang
        Director                                                                                                        | 0                                   | 0.0%                                
|                                                                                                                                   |                                     |                                     
|Bing Wang
        Director                                                                                                         | 0                                   | 0.0%                                
|                                                                                                                                   |                                     |                                     
|All Directors and Executive Officers as a Group                                                                                    | 75,516,350                          | 34.23%                              



|(1) | This percentage is a fraction with its denominator as 166,935,953 shares of the Corporation’s Common Stock.
|--- | -----------------------------------------------------------------------------------------------------------



|(2) | Lei Guo (the “Trustee”) is the trustee, on behalf of Sichuan Yinfa Resource Development Co., Ltd., a PRC company (“Yinfa Resource”). This amount includes the 43,000,000 shares of common stock issued and held by Mr Lei Guo, as Trustee, on behalf of Sichuan Yinfa Resource Development Co., Ltd.  Yinfa Resource, as Trustor, retains sole dispositive and voting control over the subject shares. Mr. Jiayin Wang is the controlling stockholder and founder of YinFa Resource and, consequently, is the indirect beneficial owner of the shares of common stock held by the Trustee
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Equity Compensation Plan Information



|Plan category                                              | Number of securities
        to be issued
        upon exercise of
        outstanding options,
        warrants and rights
        (a) | Weighted-average
        exercise price
        of outstanding options,
        warrants and rights
        (b) | Number of
        securities remaining
        available for
        future issuance under
        equity compensation plans
        (excluding securities
        reflected in column (a))
        (c)
|---------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     | 28,000,000(1)                                                                                                                           | 0                                                                                                               | 28,000,000                                                                                                                                                                                             
|                                                           |                                                                                                                                         |                                                                                                                 |                                                                                                                                                                                                        
|Equity compensation plans not approved by security holders | 0                                                                                                                                       | 0                                                                                                               | 0                                                                                                                                                                                                      
|                                                           |                                                                                                                                         |                                                                                                                 |                                                                                                                                                                                                        
|Total                                                      | 28,000,000                                                                                                                              | 0                                                                                                               | 28,000,000                                                                                                                                                                                             



|(1) | Pursuant to the Employment Agreement with Mr. Jiayin Wang, options to acquire stock at $.02 per share vested in 2010 for 3 months at 33,333.33 shares per month. Mr. Wang has not exercised these vested options as of March 31, 2011.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26





Policies and Procedures for Related Party Transactions



We intend to adopt a written policy that requires any transaction,
arrangement or relationship in which we will be a participant and the amount involved exceeds the lesser of $120,000 or one percent
of the average of the company's total assets at year end for the last two completed fiscal years, and in which any of our directors,
executive officers or shareholders beneficially owning at least 5% of any class of our voting securities, or any of their immediate
family members or any entity in which any of the foregoing persons is employed or is a general partner or principal had or will
have a direct or indirect material interest, to be submitted to our audit committee for review, consideration and approval.  In
the event that a proposed transaction with a related person involves an amount that is less than the threshold amount stated above,
the transaction will be subject to the review and approval of our Chief Executive Officer (or our Chief Financial Officer in the
event our Chief Executive Officer, an immediate family member of the Chief Executive Officer, or an entity in which our Chief Executive
Officer or a member of his immediate family is employed or is a general partner or principal is a party to such transaction).  If
the transaction is approved by our Chief Executive Officer or Chief Financial Officer, such officer will report the material terms
of the transaction to our audit committee at its next meeting.  The policy will provide for periodic monitoring of pending
and ongoing transactions. In approving or rejecting the proposed transaction, our audit committee will consider the relevant facts
and circumstances available to it, including, (1) the impact on a director’s independence if the related person is a director
or his or her family member or related entity, (2) the material terms of the proposed transaction, including the proposed aggregate
value of the transaction, (3) the benefits to us, (4) the availability of other sources for comparable services or products (if
applicable), and (5) an assessment of whether the proposed transaction is on terms that are comparable to the terms available to
an unrelated third party or to our employees generally.  Our audit committee will approve only those transactions that
the committee determines to be, in light of known circumstances, in, or not inconsistent with, our best interests and the best
interest of our shareholders.



Item 13.  Certain Relationships and
Related Transactions, and Director Independence.



There have been no transactions or proposed transactions in which
we or any of our subsidiaries was or is to be a party in which the amount involved exceeds the lesser of $120,000 or 1% of the
average total assets of the Company at year-end for the last two completed fiscal years and in which any of our directors, executive
officers or beneficial holders of more than 5% of the outstanding shares of Common Stock, or any member of the immediate family
of any of the foregoing persons, had, has or will have any direct or indirect material interest, except as follows:



Mr. Jianyin Wang is the controlling shareholder of Sichuan Yinfa
Resource and the President and Director of the Company. Mr. Wang loaned the Company RMB 3,000,000 (approximately $ US $451,467)
on December 27, 2010 through an unsecured promissory note payable on December 26, 2011 as set forth in Section 7 hereof.



Item 14.  Principal Accounting Fees
and Services.



The following table sets forth fees billed to us for professional
services rendered by Lake & Associates CPA’s LLC, our independent auditor, for the audit of our financial statements
for the years ended December 31, 2009 and December 31, 2008.



|                                   |  | 2010 |        | 2009
|---------------------------------- |  | ---- | ------ | ----
|                                   |  |      |        |     
|Audit Fees                         |  | $    | 30,000 |     
|Audit-Related Fees                 |  |      | —      |     
|Tax Fees                           |  |      | —      |     
|All Other Fees                     |  |      | —      |     
|Total Audit and Audit-Related Fees |  | $    | 30,000 |     



27







PART IV



Item 15.  Exhibits, Financial Statement
Schedules.



(a)	The following financial statements of
the Company are included following the signature page, commencing on page F-1:



Report of Independent Registered Public Accounting Firm



Consolidated Balance Sheets – as of December 31, 2010 and
2009

Consolidated Statement of Operations – For years ended December
31, 2010 and 2009

Consolidated Statement of Cash Flows – For years ended December
31, 2010 and 2009

Consolidated Statement of Equity (Deficit) – For years ended
December 31, 2010 and 2009

Notes to Audited Financial Statements



(b)	Exhibits:  The exhibits listed
in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-K



28







SIGNATURES



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



|CHINA HEALTH RESOURCE, INC. |                       
|--------------------------- | ----------------------
|                            |                       
|                            |                       
|                            |                       
|By:  /s/    Wang, Jiayin    | Date:   March 31, 2011
|Wang, Jiayin                |                       
|President                   |                       



Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated



|Signature        |  | Title                                            | Date          
|---------------- |  | ------------------------------------------------ | --------------
|                 |  |                                                  |               
|/s/ Wang, Jiayin |  | Chief Executive Officer, President, and Director | March 31, 2011
|Wang, Jiayin     |  | (Principal Executive Officer)                    |               
|                 |  |                                                  |               
|/s/ Liu, Weihai  |  | Chief Financial Officer and Director             | March 31, 2011
|Liu, Weihai      |  | (Principal Financial Officer)                    |               
|                 |  |                                                  |               
|/s/ Ping Gao     |  | Director                                         | March 31, 2011
|Ping, Gao        |  |                                                  |               
|                 |  |                                                  |               
|/s/ Wang, Bing   |  | Director                                         | March 31, 2011
|Wang, Bing       |  |                                                  |               
|                 |  |                                                  |               







29







CHINA HEALTH RESOURCE, INC.



EXHIBIT INDEX

TO

2010 ANNUAL REPORT ON FORM 10-K



|Exhibit 
    Number | Description                                                                                                                                                                                                
|------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                                                                            
|3.1                 | Certificate of Incorporation, as adopted on February 26, 2002 and as amended on May 14, 2003, October 13, 2006, April 23, 2007 and May 8, 2007.(1)                                                         
|                    |                                                                                                                                                                                                            
|3.2                 | Amended and Restated By-laws, as adopted on February 17, 2009.(1)                                                                                                                                          
|                    |                                                                                                                                                                                                            
|7.1                 | Bank Loan documents between Suining Shi Yinfa Bai Zhi Chan Ye You Xiam Gog Si and Suining City Commercial National Bank dated December 27, 2010 and related Bank Collateral Agreement. (2)                 
|                    |                                                                                                                                                                                                            
|7.2                 | Unsecured promissory note agreement with Mr. Jiayin Wang, Company’s Chairman, President and Chief Executive Officer dated December 27, 2010.(2)                                                            
|                    |                                                                                                                                                                                                            
|10.1                | License Agreement Relating to the Exclusive Right to Use “Suining Sichuan Angelica” Certified Trademark, by and between Sichuan Province Suining City DAR Association and Yinfa, dated March 16, 2004.(3)  
|                    |                                                                                                                                                                                                            
|10.2                | Import-Export Agent Executive Agreement, by and between Suining Yinfa DAR Industrial Co. and Korean DongUi Cosmetics Co., dated March 5, 2007. (4)                                                         
|                    |                                                                                                                                                                                                            
|10.3                | Sichuan DAR Purchase and Processing Contract, by and between Suining Yinfa DAR Industrial Co. and Chengdu Derentang Pharmacy Company Medicine Branch, dated April 18, 2007.(5)                             
|                    |                                                                                                                                                                                                            
|10.4                | Debt Transfer and Assumption Agreement by and among Yinfa, Suining Yinfa Building Construction and Development Co., Ltd., Chengdu Lianqiang Investment Co. and Yinfa Resource, dated September 20, 2008.(6)
|                    |                                                                                                                                                                                                            
|14.1                | Code of Ethics.(7)                                                                                                                                                                                         
|                    |                                                                                                                                                                                                            
|21.1                | Subsidiaries of Registrant. (8)                                                                                                                                                                            
|                    |                                                                                                                                                                                                            
|31.1                | Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer.(8)                                                                                                                                     
|                    |                                                                                                                                                                                                            
|31.2                | Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer.(8)                                                                                                                                     
|                    |                                                                                                                                                                                                            
|32.1                | Section 1350 Certifications of Chief Executive Officer.(8)                                                                                                                                                 
|                    |                                                                                                                                                                                                            
|32.2                | Section 1350 Certifications of Chief Financial Officer.(8)                                                                                                                                                 



|(1) | Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.       
|--- | ------------------------------------------------------------------------------------------------------------------
|(2) | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2010.    
|(3) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.     
|(4) | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 6, 2007.        
|(5) | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 20, 2007.       
|(6) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.
|(7) | Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006.     
|(8) | Filed herewith.                                                                                                   



30







CHINA HEALTH RESOURCE, INC.





CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 AND 2009



|Report of Independent Registered Public Accounting Firm                                   | F-2
|----------------------------------------------------------------------------------------- | ---
|                                                                                          |    
|Financial Statements:                                                                     |    
|                                                                                          |    
|Consolidated Balance Sheets as of December 31, 2010 and 2009                              | F-3
|                                                                                          |    
|Consolidated Statements of Operations for the years ended December 31, 2010 and 2009      | F-4
|                                                                                          |    
|Consolidated Statement of Cash Flows for the years ended December 31, 2010 and 2009       | F-5
|                                                                                          |    
|Consolidated Statement of Equity (Deficit) for the years ended December 31, 2010 and 2009 | F-6
|                                                                                          |    
|Notes to Consolidated Financial Statements                                                | F-7



F-1











REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM



To the Board of Directors and
Stockholders of China Health Resource Inc.



We have audited the accompanying consolidated
balance sheets of China Health Resource Inc. and Subsidiary (a Delaware corporation). as of December 31, 2010 and 2009 and related
statements of consolidated operations, stockholders’ deficit, comprehensive income and cash flows for the years ending December
31, 2010 and 2009. These financial statements are the responsibility of the company’s management. Our responsibility is to
express an opinion on these financial statements based on our audit.



We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.



In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of China Health Resource Inc. and Subsidiary. (a Delaware
corporation). as of December 31, 2010 and 2009 and the results of its operations and its cash flows for years ended December 31,
2010 and 2009 in conformity with accounting principles generally accepted in the United States of America.





/s/ Lake & Associates,
CPA’s LLC



Lake & Associates, CPA’s LLC

Schaumburg, Illinois

April 8, 2011













F-2











China Health Resource, Inc. and Subsidiary

Audited Consolidated Balance Sheets

As of December 31, 2010 and December 31, 2009



|                                                                                                                            |  | December 31, 2010 |           | December 31, 2009
|--------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | -----------------
|                                                                                                                            |  |                   |           | (Audited)        
|ASSETS                                                                                                                      |  |                   |           |                  
|CURRENT ASSETS                                                                                                              |  |                   |           |                  
|Cash and Cash Equivalents                                                                                                   |  | $                 | 90,306    |                  
|Accounts Receivable                                                                                                         |  |                   | 1,701,812 |                  
|Note Receivable                                                                                                             |  |                   | —         |                  
|Employee Advances                                                                                                           |  |                   | —         |                  
|Advances to Suppliers                                                                                                       |  |                   | 491       |                  
|Prepaid Expenses                                                                                                            |  |                   | 2,453,892 |                  
|Inventory                                                                                                                   |  |                   | 653,695   |                  
|TOTAL CURRENT ASSETS                                                                                                        |  |                   | 4,900,196 |                  
|                                                                                                                            |  |                   |           |                  
|FIXED ASSETS                                                                                                                |  |                   |           |                  
|Property, Plant, and Equipment                                                                                              |  |                   | 991,883   |                  
|Accumulated Depreciation                                                                                                    |  |                   | (163,928  | )                
|TOTAL NET FIXED ASSETS                                                                                                      |  |                   | 827,955   |                  
|                                                                                                                            |  |                   |           |                  
|TOTAL ASSETS                                                                                                                |  | $                 | 5,728,151 |                  
|                                                                                                                            |  |                   |           |                  
|LIABILITIES AND EQUITY                                                                                                      |  |                   |           |                  
|CURRENT LIABILITIES                                                                                                         |  |                   |           |                  
|Accounts Payable and Accrued Liabilities                                                                                    |  | $                 | 436,015   |                  
|Other Payables                                                                                                              |  |                   | 110,516   |                  
|Due to Shareholder                                                                                                          |  |                   | 376,457   |                  
|Taxes Payable                                                                                                               |  |                   | —         |                  
|Notes Payable                                                                                                               |  |                   | 905,974   |                  
|Convertible debt                                                                                                            |  |                   | 80,000    |                  
|TOTAL CURRENT LIABILITIES                                                                                                   |  |                   | 1,908,962 |                  
|                                                                                                                            |  |                   |           |                  
|TOTAL LIABILITIES                                                                                                           |  |                   | 1,908,962 |                  
|                                                                                                                            |  |                   |           |                  
|STOCKHOLDERS' EQUITY                                                                                                        |  |                   |           |                  
|Common stock Class A ( 500,000,000 shares authorized, 159,935,953 and 142,288,894 issued and outstanding, par value $0.001) |  |                   | 159,936   |                  
|Preferred Stock (50,000,000 shares authorized, 0 issued and outstanding)                                                    |  |                   | —         |                  
|Additional paid in capital                                                                                                  |  |                   | 1,274,144 |                  
|Accumulated other comprehensive income                                                                                      |  |                   | 235,737   |                  
|Retained earnings (deficit)                                                                                                 |  |                   | 2,149,372 |                  
|TOTAL STOCKHOLDERS' EQUITY                                                                                                  |  |                   | 3,819,189 |                  
|                                                                                                                            |  |                   |           |                  
|TOTAL LIABILITIES AND EQUITY                                                                                                |  | $                 | 5,728,151 |                  





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





F-3







China Health Resource, Inc. and Subsidiary

Audited Consolidated Statement of
Operations

For the Years Ended December
31, 2010 and 2009



|                                           |  | For the 12 months ended
|------------------------------------------ |  | -----------------------
|                                           |  | December 31, 2010      
|REVENUES                                   |  |                        
|Sales                                      |  | $                      
|Cost of Sales                              |  |                        
|GROSS PROFIT                               |  |                        
|                                           |  |                        
|OPERATING EXPENSES                         |  |                        
|Selling, General, and Administrative       |  |                        
|Interest Expense                           |  |                        
|TOTAL OPERATING EXPENSES                   |  |                        
|                                           |  |                        
|OPERATING INCOME (LOSS)                    |  |                        
|                                           |  |                        
|OTHER INCOME / (EXPENSES)                  |  |                        
|Non-Operating Expenses                     |  |                        
|Government Grants                          |  |                        
|Debt Forgiveness                           |  |                        
|Other                                      |  |                        
|TOTAL OTHER INCOME / (EXPENSE)             |  |                        
|                                           |  |                        
|NET INCOME (LOSS) BEFORE TAXES             |  |                        
|                                           |  |                        
|INCOME TAX EXPENSE                         |  |                        
|                                           |  |                        
|NET INCOME (LOSS)                          |  | $                      
|                                           |  |                        
|OTHER COMPREHENSIVE INCOME (LOSS)          |  |                        
|Foreign Currency Translation (Loss) Gain   |  |                        
|                                           |  |                        
|COMPREHENSIVE INCOME (LOSS)                |  | $                      
|                                           |  |                        
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |  |                        
|Basic                                      |  |                        
|Fully diluted                              |  |                        
|                                           |  |                        
|NET LOSS PER COMMON SHARE                  |  |                        
|Basic                                      |  |                        
|Fully diluted                              |  |                        
|                                           |  |                        
|** Less than $.01                          |  |                        





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



F-4







China Health Resource, Inc. and Subsidiary

Audited Consolidated Statement of
Cash Flows

For the Years  Ended December 31, 2010
and 2009



|                                                                              |  | For the 12 months ended
|----------------------------------------------------------------------------- |  | -----------------------
|                                                                              |  | December 31, 2010      
|CASH FLOWS FROM OPERATING ACTIVITIES:                                         |  |                        
|Net Income after income tax                                                   |  | $                      
|Adjustments to reconcile net income to net cash used in operating activities: |  |                        
|Depreciation                                                                  |  |                        
|Amortization of prepaid expenses                                              |  |                        
|Due from related party                                                        |  |                        
|Stock-based compensation                                                      |  |                        
|Convertible debt for consulting service                                       |  |                        
|Accounts receivable                                                           |  |                        
|Employee Advances and Other Receivable                                        |  |                        
|Prepaid Expenses                                                              |  |                        
|Inventory                                                                     |  |                        
|Accounts payable and accrued liabilities                                      |  |                        
|Other payable                                                                 |  |                        
|Others                                                                        |  |                        
|Tax payable                                                                   |  |                        
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                           |  |                        
|                                                                              |  |                        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                         |  |                        
|Proceeds from Notes Receivable                                                |  |                        
|Proceeds from disposal of property and equipment                              |  |                        
|Purchase of property, plant, and equipment                                    |  |                        
|NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                           |  |                        
|                                                                              |  |                        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                         |  |                        
|Proceed from short-term-note payable                                          |  |                        
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                     |  |                        
|                                                                              |  |                        
|FOREIGN CURRENCY TRANSLATION                                                  |  |                        
|                                                                              |  |                        
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          |  |                        
|                                                                              |  |                        
|CASH AND CASH EQUIVALENTS:                                                    |  |                        
|Beginning of period                                                           |  |                        
|End of period                                                                 |  | $                      
|                                                                              |  |                        
|SUPPLEMENTAL CASH FLOW INFORMATION:                                           |  |                        
|Common stock issued for settlement of convertible debt                        |  | $                      
|Inventory received in exchange for Note Receivable                            |  | $                      
|Cancellation of Notes Payable for purchase of land right                      |  | $                      





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





F-5







China Health Resource, Inc. and Subsidiary

Audited Condensed Consolidated Statement of
Equity

For the Years Ended December 31, 2010 and 2009





|                                           |  |              |             |                 |  |            |         |           |  |        |   |        |  |         |   |           |  | Accumulated   |   |      
|------------------------------------------ |  | ------------ | ----------- | --------------- |  | ---------- | ------- | --------- |  | ------ | - | ------ |  | ------- | - | --------- |  | ------------- | - | -----
|                                           |  | Common Stock |             | Preferred Stock |  | Additional |         | Retained  |  | Other  |   |       
|                                           |  | Class A      |             | par value       |  | Class B    |         | par value |  |        |   |        |  | Paid-in |   | Earnings  |  | Comprehensive |   |      
|                                           |  | Shares       |             | 0.001           |  | Shares     |         | 0.01      |  | Shares |   | Amount |  | Capital |   | (Deficit) |  | Income        |   | Total
|                                           |  |              |             |                 |  |            |         |           |  |        |   |        |  |         |   |           |  |               |   |      
|Balances, December 31, 2008                |  |              | 142,288,842 |                 |  |            | 142,289 |           |  |        | — |        |  |         | — |           |  | $             | — |      
|                                           |  |              |             |                 |  |            |         |           |  |        |   |        |  |         |   |           |  |               |   |      
|Fractional shares                          |  |              | 52          |                 |  |            |         |           |  |        |   |        |  |         |   |           |  |               |   |      
|Net Income(Loss) for the period            |  |              |             |                 |  |            |         |           |  |        |   |        |  |         |   |           |  |               |   |      
|Other comprehensive income                 |  |              |             |                 |  |            |         |           |  |        |   |        |  |         |   |           |  |               |   |      
|Balances @ December 31, 2009               |  |              | 142,288,894 |                 |  | $          | 142,289 |           |  |        | — |        |  | $       | — |           |  | $             | — |      
|                                           |  |              |             |                 |  |            |         |           |  |        |   |        |  |         |   |           |  |               |   |      
|Issuance for CEO's appointment and bonus   |  |              | 17,647,059  |                 |  | $          | 17,647  |           |  |        |   |        |  |         |   |           |  |               |   |      
|Share-based compensation (option expenses) |  |              |             |                 |  |            |         |           |  |        |   |        |  |         |   |           |  |               |   |      
|Net Income(Loss) for the period            |  |              |             |                 |  |            |         |           |  |        |   |        |  |         |   |           |  |               |   |      
|Other comprehensive income                 |  |              |             |                 |  |            |         |           |  |        |   |        |  |         |   |           |  |               |   |      
|Balances @ December 31, 2010               |  |              | 159,935,953 |                 |  |            | 159,936 |           |  |        | — |        |  |         | — |           |  |               | — |      





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





F-6





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



|1. | BASIS OF PRESENTATION
|-- | ---------------------



The accompanying audited condensed consolidated financial statements
have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the
instructions to Form 10-K and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. The accompanying audited condensed consolidated
financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management,
considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily
indicative of results for a full year.



The audited condensed consolidated financial statements and related
disclosures have been prepared with the presumption that users of the interim financial information have read or have access to
the Company’s annual audited consolidated financial statements for the preceding fiscal year. Accordingly, these audited
condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and
the related notes for the years ended December 31, 2009 and 2008 thereto contained in the Annual Report on Form 10-K for the year
ended December 31, 2009.





|2. | ORGANIZATION AND BUSINESS BACKGROUND
|-- | ------------------------------------



China Health Resource Inc., f/k/a Voice Diary Inc. (the “Company”
or “CHRI”) was incorporated in the State of Delaware on February 26, 2002. In June and July 2002, the Company acquired
approximately 99% of the outstanding shares of Voice Diary Ltd., an Israeli corporation (“VDL”), through the exchange
of shares of the Company with former shareholders of the Subsidiary. VDL was disposed of on August 22, 2006 pursuant to the agreement
between the Company, VDL and Arie Hinkis, the former president of the Company. On May 21, 2007, the Company changed its name to
“China Health Resource Inc.”.



On June 13, 2006, CHRI (“acquiree”) executed a Plan
of Exchange with Sui Ning Shi Yin Fa Bai Zhi Chan Ye You Xian Gong Si, a corporation organized and existing under the laws of the
Peoples’ Republic of China (“Yin Fa” or ‘acquirer”), the shareholders of Yin Fa (the “Yin Fa
Shareholders”) and the Majority Shareholder of the CHRI, pursuant to which six simultaneous transactions were consummated
at closing, as follows: (1) settlement of the liabilities of CHRI, (2) a deposit of 7,977,023 (pre-split) new shares of Class A
Common Stock and 2,000 new shares of Class B Common Stock via hand delivery by Mr. Hinkis in exchange for a payment of $264,000
in cash , (3) a deposit of 1,305,000 (pre-split) shares of Class A Common Stock via hand delivery by Mr. Hinkis in exchange for
a payment of $136,000 in cash, (4) the issuance of  30,000,000 (post-split) investment shares of Class A Common Stock
of the Registrant to the Yin Fa shareholders pursuant to Regulation S under the Securities Act of 1933, as amended, in exchange
for all of the shares of registered capital of Yin Fa, (5) vending out the CHRI subsidiary after closing, and (6) retirement of
744 shares of Class B Common Stock owned Mr. Hinkis at closing against payment of $74,000 and settlement of all unpaid salaries
and severance pay to Mr. Hinkis in the amount of $100,000, of which both amounts was taken from the payment made to CHRI for the
issued shares.



The Plan of Exchange was consummated on August 22, 2006; as a result,
Yin Fa became a wholly-owned subsidiary of CHRI. The transaction was treated for accounting purposes as a capital transaction and
recapitalization by the accounting acquirer and as a re-organization by the accounting acquiree.



Accordingly, the consolidated financial statements include the following:



| | (1) | The balance sheet consists of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost.                       
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | The statement of operations includes the operations of the acquirer for the periods presented and the operations of the acquiree from the date of the merger.



F-7





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



Yin Fa was founded on April 24, 2001 in China.  The main
business plan includes the manufacturing, processing, and sales of Dahurian Angelica Root (DAR) and its related products.  DAR
is one of the major herbs used in Chinese traditional medicines.  In 2004 and 2005, the company and Sichuan Yingfa Resource
Development Co., Ltd., (Sichuan) began the process of applying for Good Agricultural Practice of Medical Plants and Animals (GAP)
for DAR. The project passed the inspection of the State Food and Drug Administration (SFDA), and the SFDA made the final, official
announcement on February 26, 2006.



A GAP certificate means that the planning, quality, and manufacturing
of DAR meet a high and certifiable standard.  The GAP certificate
is in the name of Sichuan and the company manages the processing and sales of DAR.CHRI and its wholly owned subsidiary Yin Fa are hereafter referred
to as (the “Company”).





|3. | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
|-- | -----------------------------------------



Basis of Presentation



The financial statements included herein were prepared under the
accrual basis of accounting.



Cash and Cash Equivalents



For purposes of the Consolidated Statement of Cash Flows, the Company
considers liquid investments with an original maturity of three months or less to be cash equivalents.



Management’s Use of Estimates



The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.



Revenue Recognition



Revenue is recognized at the time the product is delivered and title
has passed to the customer. Cash discounts are recognized as an expense in the period in which it actually occurs.  Sales
allowances are recorded as a reduction of revenue in the period in which they occur. Revenue is presented net of returns.



Comprehensive Income (Loss)



The Company adopted Financial Accounting Standards Board Statement
of Financial Accounting Standards (SFAS) No. 130 (FASB ASC 220), “Reporting Comprehensive Income,” which establishes
standards for the reporting and display of comprehensive income and its components in the consolidated financial statements.



Foreign Currencies



Assets and liabilities denominated in respective functional currencies are translated into United States Dollars
at the exchange rate as of the balance sheet date.  The share capital and retained earnings are translated at exchange
rates prevailing at the time of the transactions. Revenues, costs, and expenses denominated in respective functional currencies
are translated into United States Dollars at the weighted average exchange rate for the period. The effects of foreign currencies
translation adjustments are included as a separate component of accumulated other comprehensive income.



F-8





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)





Company’s Future Operations Are Dependent on Foreign Operations



The Company’s future operations and earnings will depend on
the results of the Company’s operations in China. There can be no assurance that the Company will be able to successfully
conduct such operations, and a failure to do so would have a material adverse effect on the Company’s financial position,
results of operations, and cash flows.



Also, the success of the Company’s operations will be subject
to numerous contingencies, some of which are beyond management’s control. These contingencies include general and regional
economic conditions, prices for the Company’s products, competition, and changes in regulation. Since the Company is dependent
on international operations, specifically those in China, the Company will be subject to various additional political, economic,
and other uncertainties. Among other risks, the Company’s operations will be subject to the risks of restrictions on transfer
of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign
exchange restrictions; and political conditions and governmental regulations.



Accounts Receivable



Accounts receivable are stated at estimated net realizable value.  Accounts
receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts.  In determining
the collectability of the account, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate
allowance which is 90 days. Bad debt provision is made if fail to collect the balance after the allowance period. And the uncollectable
amount last more than one year, it will automatically account for bad debt.



Inventory



Inventory includes raw material, package material, low-value consumables
and merchandise. The Company adopts perpetual inventory system and inventories are recorded at actual cost.  Raw material,
package material and merchandise are priced at cost upon acquisition, and with the weighted average method upon issuance and shipment.
Low-value consumables are amortized at 50% of the amount upon application and amortized an additional 50% upon obsolescence.



Property, Plant, and Equipment



Property, plant, and equipment are recorded at cost, less accumulated
depreciation and impairment.  Repairs and maintenance expenditures, which are not considered improvements and do not
extend the useful life of property, plant, and equipment, are expensed as incurred. The cost and related accumulated depreciation,
applicable to sold or no longer in service property, plant, and equipment, are eliminated from the accounts and any gain or loss
is included in the statement of operations.



Depreciation is calculated to write-off the cost or basis of the
property, plant, and equipment over their estimated useful lives for the date on which they become fully operational and after
taking into account their estimated residual values (salvage value), using the straight-line method, at the following rates per
year:



| | Equipment | Straight-line for 5 to 20 years with a 3% salvage value
| | --------- | -------------------------------------------------------
| | Building  | Straight-line for 20 years with a 5% salvage value     



The Company recognizes an impairment loss on property, plant, and equipment when evidence, such as the sum
of expected future cash flows (undiscounted and without interest charges), indicates that future operations will not produce sufficient
revenue to cover the related future costs, including depreciation, and when the carrying amount of the asset cannot be realized
through sale.  Measurement of the impairment loss is based on the fair value of the assets.



F-9





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)





Income Taxes



Income taxes are provided in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109 (FASB ASC 740), “Accounting for Income Taxes.”A deferred tax
asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards.



Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that, and some portion or the entire deferred tax asset will not be realized.  Deferred
tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.



Fair Value of Financial Instruments



The carrying amounts reported in the consolidated balance sheet
for cash, accounts receivable, accounts payable, and loans payable approximate fair value based on the short-term maturity of these
instruments.  The carrying value of the Company’s long-term debt approximated its fair value based on the current
market conditions for similar debt instruments.



Impairment of Long-Lived Assets



The Company evaluated the recoverability of its property and equipment,
and other assets in accordance with Statements of Financial Accounting Standards (SFAS) No. 121, “Accounting for the Impairment
of Long-Lived Assets to be Disposed of,” which requires recognition of impairment of long-lived assets in the event the
net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets or the business
to which such intangible assets relate.



Stock-Based Compensation



Employee stock-based compensation is accounted for in accordance
with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”)
and the FASB interpretations thereof. Pursuant to those accounting pronouncements, compensation is recorded for share options granted
to employees at the date of grant based on the difference between the exercise price of the options and the market value of the
underlying shares at that date. Due to the terms of the grants, the fair value of the compensation in accordance with SFAS No.
123R, "Accounting for Stock-Based Compensation" approximates the values computed in accordance with APB No. 25.
Stock-based compensation to non-employees is accounted for in accordance with SFAS No. 123R. Under both accounting pronouncements,
as part of the necessary computations, management is required to estimate the fair value of the underlying shares. Fair value has
generally been determined by management, as the price at which the Company's shares were issued at the most recent prior placement
of the Company's Common Stock. Since the Company was approved for listing on the Over the Counter Bulletin Board - fair value is
determined according to stock market price. The timing of the grant and measurement of stock-based awards will not have a
material effect on the Company's results of operations and financial position.  Since no stock-based awards exist.



Subsequent Events



SFAS No. 165 established general standards of accounting for and disclosure of events that occur after
the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”).
An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For
public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or
transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported
by the Company. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact
the Company’s financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s
financial statements.



F-10





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



Recently Issued Accounting Pronouncements



In June 2009, the Financial Accounting Standards Board (FASB) issued
authoritative literature regarding Amendments to FASB Interpretation No. 46(R),which changes various aspects of accounting
for and disclosures of interests in variable interest entities, and Accounting for Transfers of Financial Assets, which
was issued in order to improve the relevance, representational faithfulness, and comparability of the information that a reporting
entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position,
financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. The
adoption of this statement is not expected to have a material impact on our consolidated financial position or results of operation.



In September 2009, the FASB modified the accounting for Multiple-Deliverable
Revenue Arrangementsand Certain Revenue Arrangements that Include Software Elements. These modifications alter the
methods previously required for allocating consideration received in multiple-element arrangements to require revenue allocation
based on a relative selling price method, including arrangements containing software components and non-software components that
function together to deliver the product's essential functionality. The adoption of this statement is not expected
to have a material impact on our consolidated financial position or results of operation.



In January 2010, the FASB issued authoritative guidance regarding
Improving Disclosures about Fair Value Measurements,which requires new and amended disclosure requirements for classes
of assets and liabilities, inputs and valuation techniques and transfers between levels of fair value measurements and Accounting
for Distributions to Shareholders with Components of Stock and Cash,which clarifies the accounting for distributions to shareholders
that offer them the ability to elect to receive their entire

distribution in cash or shares of equivalent value. The adoption
of this statement is not expected to have a material impact on our consolidated financial position or results of operation.



In July 2010, the FASB amended the requirements for Disclosures
about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. As a result of these amendments, an
entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures
about its financing receivables and related allowance for credit losses.



The new disclosures as of the end of the reporting period are effective for the fiscal year ending December
31, 2010, while the disclosures about activity that occurs during a reporting period are effective for the first fiscal quarter
of 2011.The
adoption of this statement is not expected to have a material impact on our consolidated financial position or results of operation.





|4. | SUPPLEMENTAL CASH FLOW INFORMATION
|-- | ----------------------------------



Supplemental disclosures of cash flow information for the period
ended December 31, 2010 and 2009 are summarized as follows:



Cash paid during the year ended December 31, 2010 and 2009 for interest
and income taxes:



|             |  | December 31, 2010 |           | December 31, 2009
|------------ |  | ----------------- | --------- | -----------------
|Income Taxes |  |                   | 1,038,578 |                  
|Interest     |  |                   | 18,222    |                  





F-12





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



|5. | ACCOUNTS RECEIVABLE
|-- | -------------------



The majority of the Company’s sales are on open credit terms
and in accordance with terms specified in the contracts governing the relevant transactions. Accounts receivable as of December
31, 2010 and December 31, 2009 consist of the following:



|                                      |  | December 31,  2010 |           | December 31,  2009
|------------------------------------- |  | ------------------ | --------- | ------------------
|Accounts receivable, gross            |  | $                  | 1,701,812 |                   
|Less: allowance for doubtful accounts |  |                    | —         |                   
|Account receivable, net               |  |                    | 1,701,812 |                   



All accounts receivables are aging within 30
days. So no provision or bad debt needs to be accrual.





|6. | INVENTORIES
|-- | -----------



Inventories as of December 31, 2010 and December
31, 2009 consist of the following:



|                      |  | December 31, 2010 |         | December 31, 2009
|--------------------- |  | ----------------- | ------- | -----------------
|Raw materials         |  | $                 | 653,695 |                  
|Low value consumables |  |                   | 0       |                  
|Finished goods        |  |                   | 0       |                  
|                      |  | $                 | 653,695 |                  



For the year ended December 31, 2010 and December
31, 2009, no provision for obsolete inventories was recorded by the Company. The large amount of raw material due to the good harvesting
period, larger volume demand of DAR, and higher purchasing than previous year. Low value consumables are the materials for the
process of finished goods. Due to the different outsourcing process adopted for the year 2010, the processing party is having all
the materials and processing cost in its total fees. The finished goods, Bailing Capsules, had been changed to process by order
due to the upgrade of the sales strategy.





|7. | PREPAID EXPENSES
|-- | ----------------



Prepaid expenses as of December 31, 2010 consist
of the following:



|                 |  | December 31, 2010 |           | December 31, 2009
|---------------- |  | ----------------- | --------- | -----------------
|Prepaid expenses |  | $                 | 2,453,892 |                  



All prepaid expenses are paid to the contracting
farmers as part of the raw material DAR purchasing amount. Due to the fast growth of the TCM (traditional Chinese medicine) market
and our cost control strategies, prepayment to the farmers or villages had been made to secure the future supply.





F-13





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



|8. | NOTE RECEIVABLE
|-- | ---------------



For the second quarter of 2010, we had a receivable trade off for
raw DAR with a non-related business partner at the end of April, 2010. According to the contract, we accepted to collect 868,900
kg of raw DAR with a unit price of RMB 2.87 per kilogram (approximately US $0.42 per kilogram) to offset an amount of US $350,312
(as of December 31, 2009) receivable balance from this partner.



For the third and fourth quarter of 2010, there were no new issue
related to or belong to note receivable.





|9. | PROPERTY, PLANT AND EQUIPMENT, NET
|-- | ----------------------------------



Property, plant and equipment, net as of December 31, 2010 and December
31, 2009 consists of the following:



|                                   |  | December 31, 2010 |          | December 31, 2009
|---------------------------------- |  | ----------------- | -------- | -----------------
|Property, plant and equipment      |  |                   | 991,883  |                  
|Less: accumulated depreciation     |  |                   | (163,928 | )                
|Property, plant and equipment, net |  | $                 | 827,956  |                  





|10. | ACCOUNT S PAYABLE AND ACCRUED LIABILITIES
|--- | -----------------------------------------



Accounts payable and accrued liabilities as of December 31, 2010
and December 31, 2009 consist of the following:



|                                               |  | December 31, 2010 |         | December 31, 2009
|---------------------------------------------- |  | ----------------- | ------- | -----------------
|Accounts payable                               |  |                   | 421,258 |                  
|Accrued liabilities                            |  |                   | 14,757  |                  
|Total accounts payable and accrued liabilities |  | $                 | 436,015 |                  



Accrued liabilities include accrued welfare payable and other taxes
payable.





|11. | NOTES PAYABLE - CURRENT
|--- | -----------------------



As of December 31, 2010 and 2009, notes payable consist of the following:



|                                                                                                      |  | December 31, 2010 |         | December 31, 2009
|----------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | -----------------
|Secured note payable to an unrelated party                                                            |  |                   |         |                  
|Bearing 8.6625 % interest Principal payments due 12/26/2011                                           |  | $                 | 452,987 |                  
|Non-secured note payable to a related party, bearing 6.95% interest Principal payments due 10/28/2011 |  |                   | 452,987 |                  
|TOTAL                                                                                                 |  | $                 | 905,974 |                  



F-14





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



|12. | OTHER PAYABLE
|--- | -------------



As of December 31, 2010 and 2009, notes payable consist of the following:





|                 |  | December 31, 2010 |         | December 31, 2009
|---------------- |  | ----------------- | ------- | -----------------
|Labor union fee  |  | $                 | 6,898   |                  
|Pension fund     |  |                   | 22,263  |                  
|Social insurance |  |                   | 81,204  |                  
|Risk Fund        |  |                   | 151     |                  
|TOTAL            |  | $                 | 110,516 |                  





|13. | CONVERTIBLE DEBT
|--- | ----------------



On July 1, 2010, the company issued a convertible
note in amount of 80,000 for the consulting services rendered by a consultant. Pursuant to the agreement, the note bear 1% annual
interest and convertible at $0.008 per share after September 1, 2010 per all outstanding principal amount and accrued interest
and fees.





|14. | INCOME TAXES
|--- | ------------



The Company conducts all its operating business
through its subsidiaries in China. The subsidiaries are governed by the income tax laws of the PRC and do not have any deferred
tax assets or deferred tax liabilities under the income tax laws of the PRC because there are no temporary differences between
financial statement carrying amounts and the tax bases of existing assets and liabilities. The Company by itself does not have
any business operating activities in the United States and is therefore not subject to United States income tax.



The Company’s subsidiaries are governed
by the Income Tax Law of the People’s Republic of China (PRC) concerning Foreign Investment Enterprises and Foreign Enterprises
and various local income tax laws (the Income Tax Laws). Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”)
law has replaced the previous laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises (“FIEs”).
The new standard EIT rate of 25% has replaced the 33% rate previously applicable to both DEs and FIEs.



Prior to 2008, under the Chinese Income Tax
Laws, FIEs generally were subject to an income tax at an effective rate of 33% (30% state income taxes plus 3% local income taxes)
on income as reported in their statutory financial statements after appropriate tax adjustments unless the enterprise was located
in specially designated regions for which more favorable effective tax rates apply. Beginning January 1, 2008, China has unified
the corporate income tax rate on foreign invested enterprises and domestic enterprises. The unified corporate income tax rate is
25%.



The Company generated substantially its net
income from its PRC operation and has recorded income tax provision for the years ended December 31, 2010 and 2009.



F-15





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



The components of (loss) income before income
taxes separating U.S. and PRC operations are as follows:



|                                       |  | 2010 |           | 2009
|-------------------------------------- |  | ---- | --------- | ----
|                                       |  |      |           |     
|Loss subject to U.S. operation         |  | $    | (407,907  | )   
|Income (loss) subject to PRC operation |  |      | 4,153,771 |     
|Income (loss) before income taxes      |  | $    | 3,745,864 |     



United States of America



The Company is registered in the State of Nevada
and is subject to United States of America tax law.



As of December 31, 2010, the U.S. operation
had $1,816,283 of net operating losses available for federal tax purposes, which are available to offset future taxable income.  The
net operating loss carry forwards begin to expire in 2030.  The Company has provided for a full valuation allowance for
any future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these
assets will not be realized in the future.



The PRC



The reconciliation of income tax rate to the
effective income tax rate based on income before income taxes stated in the consolidated statement of operations for the year ended
December 31, 2010 and 2009 is as follows:



|                                          |  | 2010 |           | 2009
|----------------------------------------- |  | ---- | --------- | ----
|Income (loss) before income taxes         |  | $    | 4,153,771 |     
|Statutory income tax rate                 |  |      | 25%       |     
|                                          |  |      | 1,038,443 |     
|Expenses not deductible for tax purposes: |  |      | 135       |     
|- Provisions                              |  |      |           |     
|Effect of tax losses                      |  |      | —         |     
|                                          |  |      |           |     
|Income tax expense                        |  | $    | 1,038,578 |     





The following table sets forth the significant
components of the aggregate net deferred tax assets of the Company as of December 31, 2010 and 2009:



|                                   |  | 2010 |          | 2009
|---------------------------------- |  | ---- | -------- | ----
|Deferred tax assets:               |  |      |          |     
|- Net operating loss carryforwards |  | $    | 617,536  |     
|Less: valuation allowance          |  |      | (617,536 | )   
|Deferred tax assets                |  | $    | —        |     



For the year ended December 31, 2010 and 2009,
valuation allowances of $617,536 and $478,848 were provided to the deferred tax assets due to the uncertainty surrounding their
realization.



F-16





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



The following table reconciles the U.S. statutory
rate to the Company’s effective tax rate:



|                                     |  | 2010 |     | 2009
|------------------------------------ |  | ---- | --- | ----
|U.S. Statutory rate                  |  |      | 34  | %   
|Foreign income not recognized in USA |  |      | (34 | )   
|China income taxes                   |  |      | 25  |     
|                                     |  |      |     |     
|Total provision for income taxes     |  | $    | 25  |     



The Company applies FASB ASC 740-10, “Accounting
for Income Taxes”, which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences
of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income
taxes consist of taxes currently due plus deferred taxes. Because the Company has no operations within the United States, there
is no provision for US income taxes and there are no deferred tax amounts as of December 31, 2010 and 2009.



The charge for taxation is based on the results
for the year as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date. Deferred taxes are accounted for using the balance sheet liability method in
respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities
are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable
that taxable profit will be available against which deductible temporary differences can be utilized.



Deferred taxes are calculated at the tax rates
that are expected to apply to the period when the asset is realized or the liability is settled. Deferred taxes are charged or
credited in the income statement, except when they relate to items credited or charged directly to equity, in which case the deferred
taxes are also recorded in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the
same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. The Company adopted
FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), as of January 1, 2007.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained
in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit
that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not”
test, no tax benefit is recorded. The adoption of FIN 48 had no affect on the Company’s financial





|15. | MAJOR CUSTOMER/VENDOR AND CONCENTRATION
|--- | ---------------------------------------



(a)        Major
customers

For the years ended December 31, 2010
and 2009, 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were derived from
customers located in the PRC.

F-17





China
Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



For the year ended December 31, 2009, major
customers and vendors with their revenues are presented as follows:



|Customers   |  |   | Revenues  | % | AR  | %       |    
|----------- |  | - | --------- | - | --- | ------- | ---
|Customer A  |  | $ | 1,969,858 |   | 45% | 752,877 | 85%
|Customer  B |  |   | 612,845   |   | 14% | 63,167  | 7% 
|Customer C  |  |   | 350,197   |   | 8%  | 43,818  | 4% 
|Customer D  |  |   | 131,324   |   | 3%  | 8,089   | 1% 
|Customer E  |  |   | 87,549    |   | 2%  | 18,243  | 2% 
|Total       |  | $ | 3,151,773 |   | 72% | 886,195 | 99%



For the year ended December 31, 2010, major
customers with their revenues are presented as follows:



|Customers  |  |   | Revenues  | % | AR  | %         |     
|---------- |  | - | --------- | - | --- | --------- | ----
|Customer A |  | $ | 4,240,403 |   | 41% | 602,412   | 35% 
|Customer B |  |   | 1,258,363 |   | 13% | 264,243   | 16% 
|Customer C |  |   | 1,177,696 |   | 11% | 235,953   | 14% 
|Customer D |  |   | 608,154   |   | 6%  | 133,443   | 8%  
|Customer E |  |   | 424,671   |   | 4%  | 193,184   | 11% 
|Customer F |  |   | 393,402   |   | 4%  | 227,279   | 13% 
|Customer G |  |   | 285,140   |   | 3%  | 45,299    | 3%  
|Total      |  | $ | 8,398,324 |   | 82% | 1,701,812 | 100%



All customers are all non-related parties,
located in Sichuan province, China. The sole business relationship with Yinfa is to purchase raw DAR or Yishen Capsule. For the
year ended December 31, 2010, 82% of the total revenue is contributed by the corporate customers and 18% of total revenue is contributed
by individual customers compare to 72% of the total revenue is contributed by the corporate customers and 28% of total revenue
is contributed by individual customers for the year ended December 31, 2009.



(b)        Credit risk



Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company
performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.





|16. | SHARE-BASED COMPENSATION
|--- | ------------------------



Effective August 20, 2010, the Company’s
Board of Directors appointed Mr. Jiayin Wang Chief Executive Officer of the Company. The Board of Directors has approved the
following compensation for Mr. Wang in his capacity as the Company’s Chief Executive Officer:



(a) no annual base salary will be paid until
such time as the Company achieves $1,000,000 in annual net income, whereupon Mr. Wang will receive an annual base salary of based
upon the Company’s market capitalization and fair market rate of a public company chief executive officer;



F-18





China Health Resource, Inc. and Subsidiary

Notes to Audited Consolidated Financial
Statements

For the Years Ended December 31, 2010 and
2009

(Expressed in USD)



(b) a signing bonus totaling $50,000, payable
on August 20, 2010 in shares of the Company's Class A common stock (the "Common Stock") based on a price per share of
$0.00782, the average of the closing prices of the Common Stock as quoted on the OTC Bulletin Board for the five (5) trading days
ending on such date.  Mr. Wang received 6,393,862 shares of Common Stock as a signing bonus which shares are not registered
under the U.S. Securities Act of 1933, as amended (the "1933 Act");



c) a grant of stock options to purchase 6,000,000
shares of Common Stock at an exercise price of $0.02 per share, vesting over 18 months in equal monthly installments.  The
stock options were granted pursuant to the Company’s 2009 Omnibus Incentive Plan and have a grant date of August 20,
2010; and



(d) performance bonuses payable in shares of
the Common Stock (which shares will not registered under the 1933 Act) based upon milestones and terms as follows:



i.     If
the Company achieves $500,000 in net income for the three-month period ended September 30, 2010 as shown in the Company's financial
statements contained in the Quarterly Report on Form 10-Q for such period, Mr. Wang will receive a bonus of $40,000 payable in
shares of Common Stock valued at $0.02 per share.

ii.    If
the Company achieves $1,000,000 in net income for the six-month period ended December 31, 2010, Mr. Wang will receive a bonus
of $100,000 payable in shares of Common Stock valued at $0.05 per share.

iii.   If
the Company achieves $1,500,000 in net income for the nine-month period ended March  31, 2011, Mr. Wang will receive a bonus
of $160,000 payable in shares of Common Stock valued at $0.08 per share.



Mr. Wang will also be
eligible to receive periodic stock grants and participate in the Company's incentive plans and benefit plans for which he is eligible.



In recognition of Mr. Wang's
contributions to the Company's achievement of various corporate and financial milestones, effective August 20, 2010, the Board
of Directors approved a bonus for Mr. Wang in the amount of $88,000 payable in shares of Common Stock based on a price per share
of $0.00782, the average of the closing prices of the Common Stock as quoted on the OTC Bulletin Board for the five (5) trading
days ending on such date.  Mr. Wang received 11,253,197 shares of Common Stock that are not registered under the 1933 Act
under this bonus.



For the year ended December 31, 2010, total
17,647,059 shares of Common Stock in amount of $138,000 was issued and recognized as share-based compensation. $7,958 was recognized
as option expenses for vested option as of December 31, 2010. The company has also accrued $140,000 expenses relating to CEO’s
performance bonus as of December 31, 2010.





|17. | SUBSEQUENT EVENT
|--- | ----------------



In January, 2011, partial amount ($56,000)
of convertible note (note 14) was converted into 7,000,000 shares.



F-19